The used-vehicle market, both retail and wholesale, is skewing younger.
Two out of every three used vehicles retailed by franchised dealers in the first quarter were 4 years old or newer, according to the latest Used Vehicle Report from Edmunds.
And on the wholesale side, there has been a 5.4% year-to-date increase through May for auction volumes of vehicles 5 years old and newer, J.D. Power says in its latest Guidelines report.
Driven by increases in off-lease volume, the result is a crop of pre-owned units not all too different than their new-car counterparts in terms of technology perks and favoring SUVs, but still offering a better price bargain.
Younger, lower-mileage and lots of SUVs
Thanks to the fact that off-lease units now “dominate” used supply at franchised dealerships, the average age on these used vehicles at franchised stores is 4.3 years old, according to Edmunds.
The average mileage is at 51,349, said Edmunds, whose report focused on the franchised dealer side of the market.
Compare that to 2013, when the average age was 5 and the average mileage was 60,542.
Not to mention, more of these vehicles are SUVs, Edmunds found.
SUVs had a 40% share of the used-car market in Q1, versus their 32% share five years ago.
“Some shoppers have the misconception that used vehicles are these old, beat-up disasters waiting to happen, but that couldn’t be further from the truth in 2019. Used vehicles today actually look a lot like new vehicles,” Ivan Drury, senior manager of industry analysis at Edmunds, said in a news release.
“Limited sales during the recession mean that older cars are scarcer, and thanks to record sales and leasing during the recovery, the typical used vehicle is looking more like a late model-year SUV with low mileage and lots of great features,” Drury said.
Features like Bluetooth and backup cameras, which were more widely available on 2015 model-year vehicles (nearly 80% had Bluetooth, over 50% for backup cameras) than 2009 model-year rides (40% and less than 20%, respectively), Edmunds said.
The availability of keyless entry climbed from 20% in 2009 to around 50% in 2015. Other tech features have shown similar hikes.
“Popular vehicle technology has proliferated across the spectrum of vehicles in the past decade and an increasing number of features are now available on the used market,” Edmunds said in the report. “These features that focus on connectivity and convenience have been big selling points for consumers while cutting-edge technology revolving around electrification and automated driving hasn’t yet struck a chord with the masses.
“The wider availability of features such as Bluetooth integration and backup cameras on used vehicles reduces the differentiation between the two markets and further lessens the advantage of buying new.”
And so, too, may be the pricing gap.
Difference in price tags ‘continues to widen’
Average retail transaction prices on used cars were at $20,247 in the first quarter, an all-time high for Q1, Edmunds said, thanks to these vehicles being from larger segments, along with being newer and having greater amenities.
What’s more, there has been 17.4% runup in used prices since 2014. Meanwhile, new-car prices have climbed 14.7% in the last five years, Edmunds said.
But there is still a considerable gap between used and new, the latter having reached an average transaction price of $36,597 in Q1.
“Although used-car prices are up year-over-year, the gap between new and used continues to widen,” said Drury. “And, now that used cars are starting to mirror new ones in terms of available features, body types and mileage ― all while presenting tremendous savings to shoppers ― used vehicles are a more compelling alternative than they’ve ever been.”
Big numbers for later-model at auctions, too
Dealers attending wholesale auto auctions might notice a similar youth movement in supply there, as well.
J.D. Power data in Guidelines shows that through May, year-to-date auction volume for vehicles 5 years old and newer has reached 1.78 million units, which beats prior-year figures by 5.4%.
For the month of May, that volume was down 1.8% year-over-year and up just 1% month-over-month.
Still, J.D. Power is still expecting this year to be the height of auction volume for this age group.
“Used supply for units up to 5 years in age is expected to increase and peak in 2019, before leveling off in 2020 and 2021,” analysts said in Guidelines. “The anticipated increase will be fueled by increases in off-lease volume.
“Retail, rental and commercial volumes are also expected to increase in 2019, however, not nearly to the same degree as off-lease volume,” they added.
Much like Edmunds observed on the retail side, there has been a been lift in volume for younger larger segments.
Among the crop of 5 years old and newer vehicles, midsize pickup auction volume is up 32.5% year-to-date, compact premium SUV volume is up 29.5% year-to-date and large premium SUV volume is up 27.1%, as is compact SUV volume.