Off-lease volume at center of franchised dealer used-car sales

SANTA MONICA, Calif. - 

The 10.57 million used-car sales in the first quarter was the highest tally in an Edmunds data set of Q1 sales figures going back to 2013.

Same goes for the 2.96 million used cars that franchised dealers sold during the opening period of 2018 and the 674,297 certified pre-owned cars they moved.

But perhaps the most interesting numbers in the latest Used Car Report from Edmunds were these: 3 and 24.

As in, 3-year-old vehicles accounted for 24 percent of all franchised dealer used-car sales in Q1, according to Edmunds.

That’s up from about 21 percent a year ago, based on a graph in the Edmunds report.

That speaks to the “influx” of off-lease cars returning to market in recent years, as newer models in the pre-owned car park drive up used values, and these 3-year-old units “dominate” the franchised dealer used-car landscape.

“When the industry leased nearly 3.5 million units in 2014, that created a significant concentration of 3-year-old vehicle sales in 2017,” Edmunds said in the report.

“In 2015, nearly 4 million units were leased, and now those vehicles are returning to dealer lots, saturating the market even further — nearly a quarter of all used franchise sales are of vehicles that are only 3 years old.”

A glance at the Edmunds graph shows that roughly 13 percent of franchised dealer used-car sales in Q1 were 1-year-old vehicles; just under 15 percent were 2-year-old units; and about 12 percent were 4-year-old vehicles.

Between 5 percent and 10 percent were 5-year-old vehicles.

Aside from a slight bump from 9- to 10-year-old vehicles, the share of sales either go down or plateau with age from there.

Future off-lease volumes

Taking the lion’s share of the off-lease market has been the car segments, Edmunds said. But that could soon change.

Car segments’ share of leasing peaked at the 60- to 70-percent range in 2009, before dipping the following two years and hopping back up to about 60 percent in 2012, according to a chart in the Edmunds report.

Cars’ share of the lease market has declined each year since, dropping to the 30s this year.

Meanwhile, with the exception of a decline between 2011 and 2012, SUV share of leasing has climbed each year since 2009, according to Edmunds.

And this year, SUVs account for 66 percent of leases.

“For the last few years, car-based products reigned as the dominant vehicle type in the off-lease market. This was unfortunate timing for those lease returns given that low fuel costs shifted consumer preference from cars to SUVs and trucks,” Edmunds said in the report.

“As we enter the timeframe for SUVs and trucks to take over a larger share of lease returns, fuel costs are showing signs of rising and disrupting a market that has been stable for years.”

Quick turns

Going back to the retail sales data in the Edmunds report, it’s taking less and less time for dealers to sell 3-year-old compact and subcompact cars, in particular..

Spurred by rising gas prices that sparked demand, these two segments had the largest decreases in days-to-turn during the first quarter, according to Edmunds.

The turn rate was at 40 days for 3-year-old subcompact cars, down 8.5 percent from Q1 2017.

Compact cars took an average of 36 days to turn — lowest among all six segments included in Edmunds’ data — down from 39 a year ago and representing a decrease of 7 percent.

Days to turn also decreased for compact SUVs (from 39 to 38; a 4.1-percent drop).  

Turn rates were up for large trucks (45 to 47), midsize cars (39 to 40) and midsize SUVs (40 to 43).

Sales gains across the board

The used-car sales total for the first quarter that was referenced earlier (10.57 million) was up from 10.41 million a year ago. Total used-car sales for Q1 has climbed in each of the last three years. 

Franchised dealers increased used-car sales from 2.92 million to 2.96 million on a year-over-year basis.  

Certified pre-owned sales climbed from 647,388 units to 674,297. First-quarter CPO sales have climbed each year since at least 2013, the first year included in this particular Edmunds data set. 

 

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