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Used Cars

Report: Older, More Affordable Used Vehicles Becoming Scarce

If your shop or your customers are considering trading in or selling older used vehicles, 2017 could be the perfect time to take the leap, according to the latest Used Vehicle Market Report from Edmunds.

Analysts predict a record number of off-lease vehicles will fill dealer lots and that a declining number of older trade-ins will put significant upward pressure on the late-model used market this year. The average used vehicle trade-in is six-years-old, and Edmunds predicts the number of trade-ins will dip below 6 million this year for the first time since 2012.

“While low interest rates and consistent values are making it possible for the market to absorb these newer, more expensive off-lease vehicles, demand for older, less-expensive used vehicles hasn’t waned,” said Ivan Drury, Edmunds senior analyst. “Fewer older vehicles available puts sellers at an advantage, particularly those looking to sell vehicles that are in high demand like trucks and SUVs.”

In 2016, 38.5 million vehicles were sold in the used market, an increase of 0.6 percent from 2015. Thanks to the rise in leasing, the average used vehicle sold by a franchise dealer in 2016 was 4.1 years old, setting a new record low age and helping push the average used vehicle transaction price up to a record $19,189.

Sales of certified pre-owned (CPO) vehicles hit a new record as well in 2016—reaching 2.6 million units and encompassing 22.8 percent of all used vehicles sold by franchise dealers. However, the year-over-year growth in CPO sales was only 3.5 percent.

“CPO sales actually didn’t grow as much as would have been expected, given the number of vehicles coming off of lease,” Drury said. “This indicates dealers put more off-lease vehicles directly onto lots instead of going through the certification process, which could be one factor keeping pricing in check and allowing the market to absorb so many newer vehicles entering the market at once.”

Because lease terms on average hover around 36 months, Edmunds analysts looked at lease rates from 2014 to get a rough estimate of how many vehicles are anticipated to come off lease in 2017.

Lease volume rose 10.6 percent in 2014 compared to 2015, meaning the number of vehicles coming off lease in 2017 is likely to set another record. Lease volume also continued to set year-over-year records in 2015 and 2016, meaning off-lease volume is expected to grow rapidly in the years ahead.

“The used market as a whole is definitely in the midst of a significant transition that’s only just starting to accelerate,” Drury said.

To read the full Edmunds 2016 Used Vehicle Market Report and for more automotive industry data, insights and commentary, visit the Edmunds Industry Center: http://edmunds.com/industry-center.