Used-car sales climb 3% amid demand shift
Used-car sales in April beat year-ago figures by 3.0%, according to estimates from Cox Automotive, which said the pre-owned SAAR climbed to about 39.3 million for the month.
That compares to a used-car SAAR of 38.1 million in April 2018 and a 39.0 million used-car SAAR in March, the company said in its Manheim Used Vehicle Value Index Data & Commentary released Tuesday.
In a separate forecast released late last month, Edmunds was calling for 3.4 million used-car sales in April, down from 3.7 million in March. The resulting used-car SAAR was projected at 39.1 million, compared to 39.2 million in March.
Going back to the Cox Automotive data, such pre-owned strength observed in April continues what the company described in Monday’s Data Point report as a “shift in vehicle demand, away from new and toward used.”
New-vehicle sales, which fell 1.7% year-over-year in April and had a SAAR of 16.4 million, compared to 17.4 million in March and 17.2 million a year ago, had dipped 2% percent in the first quarter, according to the two reports from Cox Automotive.
“The used-vehicle market, on the other hand, continues to see favorable performance. Affordability concerns driven by higher vehicle prices and interest rates have reduced the pool of people who can afford to buy new,” Cox analysts said in Data Point.
“With attractive off-lease supply available, the used-vehicle market is benefiting from robust demand,” they said. “In fact, supply is more of a concern in the used- vehicle market than demand.”
And that’s quite a statement given the amount of supply in the used-car market, which appears to be peaking.
Publics embody shift toward used
The first-quarter performances of the six publicly traded dealer groups are emblematic of the demand “shift” described above, Cox Automotive said in Data Point.
Their same-store used-vehicle unit sales were up a combined 4% year-over-year in Q1, according to the six companies earnings filings cited by Cox Automotive. Their combined same-store new-vehicle units were down nearly 9%.
“Looking at Q1 performance of these publicly traded dealer groups’, which accounted for roughly 6% of new vehicle sales in the U.S., the trend in our industry is crystal clear: New sales are down, used sales are up,” Cox Automotive said in Data Point. “Consistent in their filings was recognition that the used-car business was one of the few bright spots in an otherwise difficult quarter.”
That said, how long that continues is unclear. Such strength is heavily reliant on used-car supply, which may be reaching a tipping point.
“How much they can skew to used-vehicle sales will be contingent on used-vehicle supply,” Cox Automotive went on to say. “And it will only get more difficult going forward, as the largest driver of high-demand, high-profit supply — off-lease units — are at their peak this year.”
There were 4.3 million leases written back in the record year of 2016, according to an Edmunds forecast released late last year, and those cars are now making up the off-lease volume in 2019. But as the Edmunds data shows, leasing leveled off a bit, with 4.2 million units leased in both 2017 and 2018.
And in a related analysis released last month, Cox Automotive said the “total volume of wholesale requiring disposal” will reach a peak this year.
Specifically, 16.6 million units are projected to be wholesaled, up from 16.4 million units last year, 15.9 million units in 2017 and 15.5 million units in 2016, the company said.