Used-car sales expected to grow into 2016

CARY, N.C. - 

There’s a lot of chatter regarding the new-vehicle sales heading into the winter, with Kelley Blue Book’s most recent estimate at 17.4 million for the year. But dealers aren’t just concerned with the flash of new sales — they know many of those vehicles will be coming back to their lots eventually, and they want to know what to expect.

Not that the new-vehicle figure isn’t impressive, but in the first three quarters of the year, the National Automobile Dealers Association’s data reveals that more than 30.7 million used units were sold in the U.S., a 1.8-percent increase over last year’s results.

And, according to KBB’s analyst Tim Fleming, those used-sales should continue to blossom with the assistance of new sales and vehicles coming back into the used market heading into the coming years.

“We are looking for used-vehicle sales to continue to grow as we move into 2016,” Fleming said. “The new-car market is incredibly strong right now, but that growth is expected to level off in 2016 and 2017.

Meanwhile, the supply of late-model used vehicles will only increase, thanks to the booming sales growth we’ve (seen) in the past few years, much of which came from leasing. With the increasing supply boosted by more lease returns, prices should continue to ease from record highs seen a few years ago, making the used market even more attractive to consumers,” he said. More lease returns will also mean more opportunities for CPO, which remains a relatively small part of the market but which has also increased its foothold in the industry in recent years.”

Let’s break that statement down a bit. There appears to be a bit of a consensus in the industry that new-vehicle sales growth will peak in the next couple of years.

Following reports from numerous news outlets covering an event in October, where IHS Automotive made a prediction that new-vehicle sales would peak in 2017, Auto Remarketing caught back up with IHS to confirm that those values were still consistent today.

According to Chris Hopson, IHS Automotive’s manager of North American light vehicle sales forecasting, his organization is still holding to its predicted peak of 18.2 million units to be sold in 2017, before tapering off to around 17 million units by 2022. This continued influx of new vehicles bodes well for the next few years of used sales.

“What we’re seeing right now, helping to help support new-vehicle sales, could have a trickle-down effect come the next 48 months maybe to the three- or four-year outlook,” Hopson said.

Jeff Schuster, the senior vice president of forecasting at LMC Automotive, in partnership with J.D. Power’s new-vehicle retail sales report for October, provided a sales outlook, as well.

“The tenacious pace of auto sales since May, combined with the current favorable position of the U.S. economy, is increasing the level of upside potential to 2015 by 100,000 units, while nearly wiping out any downside risk,” Schuster said. “Looking forward, the forecast for 2016 is 17.6 million units, but growing economic stability and consumer confidence could easily push light-vehicle sales toward 17.8 million units next year.”

Hopson says the high uptick in lease rates will fuel those vehicles returning to the used market. Jessica Caldwell, the executive director of strategic analytics at Edmunds.com, said that 29 percent of the new vehicles purchased in October were leased, the highest percentage since March.

One thing that Hopson also says the industry needs to pay attention to are loan terms lengths, which are currently the highest the industry has ever seen. With longer loan terms and credit moving up, people tend to hold onto their vehicles longer, adding another dynamic when trying to predict used-vehicle supply possibilities. Hopson still has questions for the situation, which has no clear answer at this time.

“Is this going to be something that changes some of the dynamics of what we’ve seen historically on vehicle ownership and how it flows through the used market?” Hopson conjectured.

We’ll have to wait and see.

Curious how CPO results favored through last month? Check out Auto Remarketing Editor Joe Overby’s analysis here

Today's top headlines

X