Used-car sales continue to climb in May
Despite record-high wholesale prices and limited supply, used-car sales continued to gain traction in May.
Cox Automotive said in a Data Point report last week that there was a
Used-car sales Archives | Page 3 of 4 | Auto Remarketing
Used-vehicle sales show major rebound in March
What a difference a year makes.
According to analysis from Cox Automotive, the seasonally adjusted annualized rate of total used-vehicle sales was 40.5 million last month, which is 117% stronger than March 2020, when COVID-19 was declared a pandemic and the impact to markets quickly escalated.
In addition to soundly beating the year-ago used-car SAAR of 18.5 million, the used-car sales rate in March was also stronger than February’s clip (38.0 million) and where the market was in March 2019 (39.2 million), according to Cox.
Looking at Cox Automotive’s estimated used retail SAAR, which includes only the sales involving a dealer, March’s rate came in at 22.2 million. That compares to 9.8 million in March 2020, 20.8 million in February 2021 and 20.6 million in March 2019.
Cox Automotive is forecasting 39.3 million total used-vehicle sales in 2021, softer than the 40.0 million in 2019 but up from 37.2 million last year.
The company anticipates 40.2 million total used-vehicle sales in 2022 and then 39.8 million in 2023.
Analysts are projecting 21.5 million retail used-vehicle sales this year, which would beat both 2020 and 2019 figures. Last year, there were 19.7 million used retail sales, down from 21.0 million in 2019.
Elsewhere, TrueCar said in late March it was forecasting 3.6 million used-vehicle sales for that month, which would beat February figures by 1% and eclipse year-ago numbers by 104%.
TrueCar was projecting 10.33 million used-car sales for the first quarter, which would beat year-ago figures (8.61 million) by 20%.
And in a news release recapping its latest NADA Market Beat data, the National Automobile Dealers Association said short new-car supply is helping to drive used-car sales and prices.
TrueCar forecasts 3.5 million used-car sales this month
Used-vehicle sales this month will likely beat January figures by a double-digit percentage, but slow from a year ago.
That’s according to a forecast released Tuesday by TrueCar, which called for 3.5 million used-vehicle sales for February.
That sum would beat January sales by 12% but fall 4% short of February 2020 numbers, TrueCar said.
In late January, TrueCar was projecting 3.2 million used-car sales for that month, a 1% year-over-year increase and a 10% month-over-month hike.
In a later analysis, Cox Automotive found that the pre-owned vehicle market didn’t get quite as hot a start to the year as it did in 2020, but did point out some good signs.
There was a 5% year-over-year decline in January’s used-vehicle sales, according to Cox Automotive, which said the total used SAAR was approximately 38.1 million for the month.
That’s on par with the 38 million SAAR in December and softer than the 40.1 million rate in 2020.
That said, January was the strongest the used-car SAAR had been since September when it reached 39 million, Cox data shows. The last five months (starting with January) have shown relative stability, as the used-car SAAR has remained between 37 million and 39 million.
In the certified pre-owned segment of used, a sluggish start has not dimmed Cox Automotive’s outlook sales this year.
According to the company’s analysis of Motor Intelligence data, January’s 201,023 CPO sales marked a 7% year-over-year decline and a 13% month-over-month drop.
But take last month's softening with a grain of salt. The year-ago figure marked a decade-high for January certified sales, and December’s tally was “seasonally strong,” Cox said in the Data Point report from Feb. 12.
What’s more, Cox is projecting there will be 2.8 million CPO sales this year. While that’s subject to change, it would handily beat year-ago figures of 2.6 million and put the industry back to where it was in 2019 — which happened to be the ninth consecutive year of record sales, a streak that ended last year.
“The CPO market has been one of the strongest performing segments within the auto retail market despite the ongoing pandemic,” Cox said in the analysis. “Going into 2021, we expect the market to continue its consistent performance for year-over-year gains.”
How used-car sales started 2021
The pre-owned vehicle market didn’t get quite as hot a start to the year as it did in 2020. But there are some good signs.
There was a 5% year-over-year decline in January’s used-vehicle sales, according to Cox Automotive, which said the total used SAAR was approximately 38.1 million for the month.
That’s on par with the 38 million SAAR in December and softer than the 40.1 million rate a year ago.
That said, last month was the strongest the used-car SAAR had been since September when it reached 39 million, Cox data shows. The last five months have shown relative stability, as the used-car SAAR has remained between 37 million and 39 million.
This follows a wild first eight months of 2020, as the SAAR dipped as low as 18 million (March) and rose to heights of 43 million (July), according to the data set.
Meanwhile, isolating the used-car numbers to dealer sales — what Cox Automotive determines to be the retail SAAR — also shows sustained stability.
Cox Automotive estimated that the retail used-car SAAR began 2021 at 20.8 million, up from 20.2 million in December and the highest reading since August (21.5 million). A year ago, it was 21.2 million.
In recent months, the retail SAAR has reached 20.7 million for September, 20.4 million in October, 19.6 million in November, 20.2 in December and 20.8 million last month.
The used-car retail SAAR peaked at 22.8 million in July, following the year’s trough of 9.5 million in March.
Looking at other analyses from around the industry, TrueCar said in late January that monthly used-car sales were expected to beat both year-ago and December figures.
TrueCar estimated in a forecast released Jan. 26 that there would be 3.2 million used-car sales for the month, beating January 2020 by 1% and December’s by 10%.
As for where the total sales are headed in the used-car market this year, Edmunds is forecasting 41 million this year, up from an estimated 38.3 million sales in 2020.
TrueCar is forecasting 40.05 million total used-car sales for this year.
Cox Automotive is projecting used sales will climb to 39.3 million this year and 40.2 million next year, before moving down slightly to 39.8 million in 2023.
Cox Automotive estimated that used-car retail sales (those involving a dealer) fell from 20.8 million in 2019 to 19.5 million last year.
But those used retail numbers are expected to climb to 21.2 million sales this year, 22.1 million in 2022 and 22.4 million in 2023.
Used-car sales on way up in January
The used-vehicle market appears off to a good start in 2021, with January sales expected to beat both year-ago and December figures.
TrueCar estimates in a forecast released Tuesday that there will be 3.2 million used-car sales this month. That would beat January 2020 by 1% and December by 10%.
In a related analysis, Cox Automotive chief economist Jonathan Smoke wrote in Monday’s Auto Market Weekly Summary, “Used-vehicle sales are likely to end January at least as strong as December, and momentum is improving. Used-vehicle values also are increasing.”
Looking at used retail in particular (sales involving a dealer), Smoke said last month showed continued momentum in sales, and that despite January typically being a slower month, last week’s sales were stronger than the prior week’s.
“Conditions suggest we will at least see a similar performance in January as we saw in December,” Smoke said.
And in a Market Insights report Tuesday, Black Book said that better-than-usual January for dealers may be attributable, in part, to the recent federal stimulus.
“Dealers continue to report an uptick in used retail sales, particularly when compared to a typical January, and some dealers are now attributing the uptick to the $600 stimulus that came at the end of 2020. New retail demand is also still doing well, but dealers are reporting a slowdown in activity compared to December,” Black Book said in the report.
Shift from new to used?
And some consumers may shift from new to used, amid new-car transaction prices that have softened from record highs in December but are forecasted to be 4.2% higher year-over-year, according to TrueCar.
“Average transaction prices have finally come down from the record-setting highs we saw last month, but are still higher than this time last year. Of the bigger manufacturers, only Kia has an average transaction price below $30,000,” TrueCar vice president of industry insights Alain Nana-Sinkam said in a news release.
“We expect this trend to continue as consumers desire pricier trucks and SUVs. As new vehicle prices rise, we may see more price-conscious shoppers gravitate back towards smaller segments or the used-car market due to growing concerns around affordability,” he said.
And with automakers trimming car models from their new-vehicle lineups, this has led to fewer and fewer affordable alternatives amid such record transaction prices.
That, says Edmunds, “will create a barrier to entry for many consumers and force them into the used-car market.”
Perhaps to the tune of close to 500,000 shoppers, estimates Edmunds analyst Ivan Drury.
On Thursday, Edmunds shared several projections for 2021, one of which was that the new vehicles “will continue to grow more pricey and exclusive as the pandemic drives an income divide among Americans,” the company said in a news release.
In fact, the average price on a new vehicle last month was $40,753, a record high, Edmunds said. And it’s likely to continue rising, driven by increased demand for pricier trucks and SUVs.
“Edmunds analysts expect this number to go up as affluent consumers benefiting from lower interest rates and healthy stock and housing markets continue buying bigger, more expensive new trucks and SUVs,” the company said of December’s record new-car prices.
This is likely to have a ripple effect on used cars, as many consumers are expected to be priced out of new vehicles, given the rising prices and lack of lower-cost alternatives.
In follow-up comments shared by Edmunds via email, Drury estimates a half-million consumers could turn from would-be new-car buyers to used-vehicle buyers this year.
His calculation is based on the 2014 sales volumes of models cut from automaker lineups for 2021, assuming a 6-year trade-in cycle, Edmunds said.
Full-year forecasts
As for where the total sales are headed in the used-car market, Edmunds is forecasting 41 million this year, up from an estimated 38.3 million sales in 2020.
TrueCar is forecasting 40.05 million total used-car sales for this year.
Cox Automotive is projecting used sales will climb to 39.3 million this year and 40.2 million next year, before moving down slightly to 39.8 million in 2023.
Cox Automotive estimated that used-car retail sales (those involving a dealer) fell from 20.8 million in 2019 to 19.5 million last year.
But those used retail numbers are expected to climb to 21.2 million sales this year, 22.1 million in 2022 and 22.4 million in 2023.
Another projection for 2021 used-car sales
Look for used-car sales to go slightly north of 40 million units in 2021 after a slower year in 2020.
More specifically, TrueCar is forecasting 40.05 million total used-car sales for this year.
On the new-car side, the company is projecting 16.0 million total sales this year, with 13.9 million of those being retail sales. Those tallies would represent gains of 10% and 9.6%, respectively, TrueCar said.
In 2020, there were 14.6 million total new-car sales, down from 17.0 million in 2019. For retail new-car sales, the tally dipped from 13.8 million to 12.7 million, TrueCar said.
“The year 2020 was a challenging one for the automotive industry and the economy at large, but the recovery came faster than most expected, providing strong momentum and pent-up demand going into 2021,” TrueCar lead industry analyst Nick Woolard said in a news release.
“Retail demand is healthy and will remain the driving force for total vehicle sales in 2021. Fleet sales will also increase, but at a much slower pace, due to the uncertainty surrounding travel,” he said.
In another forecast, the National Automobile Dealers Association is projecting 15.5 million new-car sales this year, up from 14.46 million in 2020.
“The coronavirus pandemic certainly impacted new light-vehicle sales in 2020, not to mention the U.S. economy as a whole,” NADA chief economist Patrick Manzi said in a news release. “Our forecast at the start of 2020 estimated new light-vehicle sales would fall by one to two percent compared to 2019 for a total of 16.8 million units sold, but once COVID hit, we knew this would be a different year than anticipated.”
He later added: ““While the coronavirus was something that no one in the auto industry expected, the industry rallied and adapted to the new state of play. Looking forward, we are optimistic about the continued recovery of the new light-vehicle market.”
Turning back to pre-owned, the recent Cox Automotive Industry Insights 2021 presentation indicated there was an estimated 36.7 million total used-vehicle sales in 2020.
While that’s down from 40 million in 2019, Cox Automotive is projecting used sales to climb to 39.3 million this year and 40.2 million next year, before moving down slightly to 39.8 million in 2023.
Cox Automotive estimated that used-car retail sales (those involving a dealer) fell from 20.8 million in 2019 to 19.5 million last year.
But those used retail numbers are expected to climb to 21.2 million sales this year, 22.1 million in 2022 and 22.4 million in 2023.
In the Jan. 8 presentation, Cox Automotive manager of economic and industry insights Zo Rahim said that, “we have seen a recovery in the retail market; this is especially true of the used-vehicle market. It is important to keep in mind that the total used-vehicle market in the U.S. is two-and-a-half times the size of the new-vehicle market.
“It absolutely dominates the automotive landscape. We have seen the used market improve greatly from the lows back in April.”
The used-car market tends to be less volatile, Rahim said, therefore the pre-owned market declines are not as steep as those in new cars. And they tend to bounce back faster.
While last year showed declines, “we can expect continued recovery in the used-vehicle market as we navigate 2021 and beyond,” Rahim said.
In another metric that could impact both used- and new-car sales, TrueCar pinpointed the average new-car interest rate from 2020 at 4.74% and the average used-car interest rate at 8.47%. Both are likely to remain steady there this year.
“Car shoppers in 2021 can expect interest rates for new and used vehicles to remain at the low levels we saw towards the latter part of 2020 with support from the Federal Reserve,” said Alain Nana-Sinkam, TrueCar’s vice president of strategic initiatives, in a news release. “The Fed is signaling continued support into 2021 as the U.S. economy recovers from the pandemic. The low interest rates are likely to stay at least through the end of the year.”
Used-car sales likely up for 5th straight month
Used-vehicle sales for October are likely to beat year-ago figures by 1%, according to an ALG/TrueCar forecast, which calls for 3.3 million used sales for the month.
While this tally would be a 4% drop from September, it would represent the fifth consecutive year-over-year increase in used sales, ALG/TrueCar said.
Used-vehicle prices are also climbing from October 2019, as are new-car prices, according to the analysis.
“New-vehicle average transaction prices continue to rise year-over-year due to this consumer preference toward larger vehicles. Used-vehicle prices have also increased significantly in the past few months, as a result of the new-car inventory shortages and strong consumer demand,” TrueCar director of OEM analytics Nick Woolard said in a news release.
“On the TrueCar platform, used-vehicle listing prices increased by 7.6% year over year, making this a great time for consumers who are looking to trade-in or sell their vehicles and use the funds to upgrade to a new vehicle,” Woolard said.
On the new-car side, TrueCar and ALG are forecasting just under 1.31 million sales for October. Adjusted for selling days, that would be a 6.1% year-over-year decrease.
But when fleet sales are taken out of the equation, the projected 1.19 million new sales would be up 0.3%, adjusted for selling days.
“The auto industry recovery is absolutely striking. We clawed back more new car sales each month since sales bottomed out in April and are now seeing year-over-year new-car retail sales growth for two consecutive months. This is a phenomenal outcome for the industry, as inventory is starting to rebound and demand remains high. There are positive signals that the recovery will sustain,” ALG chief industry analyst Eric Lyman said in the release.
“A handful of brands, such as Mercedes and Subaru, are seeing an increase in sales month-over-month which is notable given that sales typically trend stronger in September than in October,” said Lyman. “These brands were hit harder by inventory shortages previously and are starting to replenish supply and address pent-up demand.”
Enterprise Car Sales boosts used-vehicle stock as tax season nears
As April 15 looms, 58% of those planning to spend their tax refunds intend to put them toward a car purchase.
That is according to a new survey from Enterprise Car Sales, which says it expects that trend to bring continued growth in the used car segment “as drivers look to maximize value and quality for their investment.”
In addition, 19% of those planning to put their refunds into savings said they were saving to buy a new or used car in the future.
But Enterprise Car Sales, a service of the Enterprise Rent-A-Car brand that sells late-model used vehicles, highlighted used vehicles in addressing the survey. The company said that in anticipation of tax season, it was increasing its used-vehicle stock by 30%.
The company also said it has launched a tax-season campaign “to help consumers get more mileage out of their tax refund car-shopping.”
The campaign highlights used cars with payments of less than $300 per month, and company said its website includes additional campaign details, consumer tips and insights for those in the market for a used car.
The company noted that whether used-car buyers buy now or later, they are focused on getting a good deal. Enterprise sourced McKinsey & Company in stating that the used car segment today is more than double the size of the new car market and is growing at a faster pace.
Enterprise Car Sales says that trend is driven mainly by price. Various studies show used cars can cost much less than the comparable new car model, according to the company, which conducted the survey Jan. 15-26 among 1,000 U.S. adults aged 18 to 60 who plan on purchasing a used car or truck within the next two years.
Also, the company said the used-car market is made up of more and more “lightly used” vehicles and said that includes former rental cars from Enterprise and others. At much more reasonable prices, those lightly used vehicles offer a balance of quality, value and advanced technology, Enterprise Car Sales said.
That balance is a major selling point for used car buyers, according to the Enterprise survey.
Ninety-six percent of survey respondents said buying a used car is a way to get a great car at a great value.
In addition, 54% said buying a used vehicle makes them feel more eco-friendly.
Forty-one percent said they would never buy a new car, which Enterprise said was “eye-opening.” High prices and fast depreciation were the primary concerns of a new car purchase.
Respondents actually mentioned only one consideration that they did not like about the used car experience: Haggling over the price.
Seventy-two percent said they would prefer to shop for a used car knowing that the prices were final. That way, they wouldn’t have to negotiate.
“Nobody knows more about buying and selling cars than Enterprise, and we put that knowledge to work through Enterprise Car Sales to provide a great experience for anyone looking to invest in a quality used car,” said Enterprise Car Sales vice president Mike Bystrom.
He continued, “Our thousands of 1- to 3-year-old, low-mileage vehicles include more than 250 makes and models of cars, SUVS, trucks and vans. That makes us an ideal choice for used-car buyers.”
Used-car SAAR rates steady in September
Used-car sales saw only a slight decline last month, and the seasonally adjusted annualized rate of sales remains on a steady course, according to Cox Automotive.
There was a 0.1% dip in sales volume for used cars in September, the company said, compared to an 11.3% slide on the new-car side.
The overall used-car SAAR for the month was 39.8 million, which was flat month-over-month and up from 39.7 million in September 2018, the company said.
Separately, there’s also a metric termed “used retail SAAR,” where Cox Automotive takes out private-party sales and only considers franchised and independent dealer sales.
That SAAR measure came out to 20 million units last month, steady with August and up from 19.6 million in 2018.
Here is how the rolling 13-month overall used-car SAAR and the used retail SAAR figures have trended over the past year, respectively, according to data provided by Cox Automotive.
Overall Used-Car SAAR
September 2018: 39.7 million
October 2018: 40 million
November 2018: 36.8 million
December 2018: 39.8 million
January 2019: 39.1 million
February 2019: 37.7 million
March 2019: 40 million
April 2019: 41.3 million
May 2019: 39.3 million
June 2019: 39.8 million
July 2019: 39.7 million
August 2019: 39.8 million
September 2019: 39.8 million
Used Retail SAAR
September 2018: 19.6 million
October 2018: 19.4 million
November 2018: 16.5 million
December 2018: 18.4 million
January 2019: 22.4 million
February 2019: 21.5 million
March 2019: 20.5 million
April 2019: 19.3 million
May 2019: 19.2 million
June 2019: 19.9 million
July 2019: 19.9 million
August 2019: 20 million
September 2019: 20 million
In the Q3 Manheim Used Vehicle Value Index Call, Cox Automotive chief economist Jonathan Smoke shared more detail about the difference between the overall used SAAR and the used retail SAAR.
Cox Automotive’s estimates are “basically different than the perceived conventional wisdom in the market,” Smoke said.
“The conventional wisdom agrees on the total, that this is roughly a 40 million used-vehicle market, but the traditional view in the United States has been, it’s been a third, a third a third,” he said, referring to the notion of a third of used-car sales coming from independent sales, a third coming from franchised dealers and a third being between private parties.
“However, our observation is based on a detailed analysis of registration data from many years that highly challenge that question,” Smoke said.
He said that the number of used cars that franchised dealers sell is less than the number of new cars they sell. Based on that math, Smoke said, franchised stores “can’t possibly” take up a third of the used-car market, which again, reaches 40 million annually, he said.
Rather, based on the SAAR trends above, it appears the private-party market takes up about half of the used-car market, with dealers (franchised and independents combined) taking up the other half.
Offering some overall market analysis, Smoke said in a news release: “While the new-vehicle market saw a big drop in volume in September, total used-vehicle sales volume was down only slightly.
“However, in September, the Manheim Used Vehicle Value Index saw its worst month since January, ending flat year-over-year and negative month-over-month. This also was the worst September decline in 18 years. The question will be if this is an earlier seasonal shift, as we saw last October, or is this the start of a more rapid deceleration in used vehicle values tied to decreasing demand.”
Why used-car sales should remain at peak levels in 2019
It wasn’t the strongest of starts to the year for used-vehicle sales, but the first quarter closed with the pre-owned market poised to remain at peak levels.
The annualized rate of used-car sales in March was more than 39.5 million*, beating year-ago figures by roughly 200,000 units, Cox Automotive manager of economic and industry insights Zo Rahim said during a conference call on Cox Automotive’s Q1 Market Review.
(*This is a measure of annualized numbers, which provides a trailing 12-month view of sales, Cox Automotive clarified. This is different than the seasonally adjusted annualized rate, commonly referred to as SAAR)
There were 38.6 million used-car sales in 2016, followed by 39.4 million in 2017 and an estimated 39.5 million in 2018, according to the data provided by Cox Automotive.
It is forecasting 39.5 million used-car sales again this year, followed by 39.2 million in 2020.
“Like new, we started the year soft for used-vehicle sales but have since rebounded as we kick off the spring selling season and demand comes into the market,” said Rahim. “It is important to note that we expect total wholesale volumes to be down slightly this year, so supply constraints will impact used sales more than demand.
“The used-vehicle market is not expected to grow in 2019, as we peak into a plateau,” Rahim said. “But keep in mind, we expect 2019, like 2018, to be the strongest used environment of this expansion.”
In his Auto Market Weekly Summary to open April, Cox Automotive chief economist Jonathan Smoke wrote, “Tax refunds are powering a strong used-car market, especially for affordable vehicles.”
Some say pre-owned will ‘strengthen and grow’
The forecast was even more robust over at Edmunds. It pegged 2018 used-car sales at 40.2 million, a sum it anticipates will climb.
“Used vehicles have finally emerged as a compelling alternative to new, and market factors in 2019 will only increase their appeal,” Edmunds said in its Used Vehicle Outlook 2019 report. “Growing new-vehicle transaction prices and an oversupply of used vehicles have expanded the savings advantage in pre-owned vehicles.
“Additionally, consumers give up less going the used route since late-model cars are rich in technology and come in the body styles,” it said.
Edmunds later added: “While the new-vehicle market is expected to fall below 17 million sales for the first time in five years, we expect used-vehicle sales, which crossed 40 million units in 2018, to strengthen and grow.”
Edmunds was projecting late last month there would be 3.7 million used-car sales in March, up from 3.5 million in February. The resulting SAAR would be 39.2 million, compared to 39.3 million a month earlier.
Impact of prices, interest rates & payments
In an analysis of first-quarter car sales, National Automobile Dealers Association senior economist Patrick Manzi discussed pricing and payment differences between new and used cars.
Citing January’s NADA Average Dealership Financial Profile Series report, new-car transaction prices were up 3.3 percent year-over-year at $36,410, he said. Granted, used-car transaction prices for franchised dealers are up, too: In January, they were $20,797, a 4.3-percent hike, Manzi said.
But he noted that, “The average monthly payment gap between new and used vehicles continues to increase, which will likely result in more consumers shifting to the used market.”
Later, looking at key trends for the remainder of the year, Manzi said: “Inventory levels of off-lease vehicles are expected to peak in the coming months, but there will still be a steady supply over the next few years. As prices continue to climb on the new-vehicle side, more and more consumers will consider the used-vehicle market.
“The Fed has signaled that we may not see any interest rate increases in 2019. This will help slow the monthly payment creep that we saw in 2018. Payments will still likely increase throughout the year because of rising vehicle costs, but we won’t have the added pressure of cost increases coming from rising interest rates,” he said. “We have seen credit standards tightening in recent months with a larger share of auto loans being made to more credit worthy customers. We expect that this will continue throughout the year as well.”
Along similar lines, Edmunds points out in its outlook report that the gap between new- and used-car prices has grown at the same time that their difference in interest rates has declined.
There was a 56-percent difference ($11,398) between the average price of a new vehicle and that of a used vehicle back in 2013, Edmunds said. Last year, that difference was 62 percent ($13,705).
Meanwhile, the gap between the respective interest rates of new vehicles and used vehicles has declined each year since 2012, Edmunds said, falling from 4.0 percentage points seven years ago to 2.7 percentage points last year.
“The historically low interest rates of the post-recessionary period have slowly come to an end,” Edmunds said in its report. “New-car interest rates jumped 17 percent (or 0.8 point) in 2018 — rising from an average interest rate of 4.9 percent in 2017 to an average of 5.7 percent in 2018.
“Rates for used vehicles have risen at a slower clip, with interest rates increasing 9 percent in the same period,” it continued. “Although average rates for used vehicles will always be higher than for new, the lack of subsidized finance programs in the new-car market has narrowed the gap between interest rates for the two segments.”
