Changing Dynamics of Today’s Used Car Market

Changing Dynamics of Today’s Used Car Market

Despite early estimates, used-car sales have actually climbed 1.2% so far this year. This includes the best second quarter ever for the used-car market. For the first time, more than 10 million used cars were sold in Q2, according to a recent report from Edmunds. That’s a 1.7% year-over-year uptick and an increase of 7.9% from the same time period in 2012.

Also up significantly are used car retail transaction prices. Consumers paid an average of $19,227 for a used vehicle in the second quarter. Analysts are predicting a 3% lift in 2017 used car sales- thanks in part to demand for replacement vehicles in southeast Texas following Hurricane Harvey.

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Although used car prices have increased, the gains are on a slight decline. There are a few major contributing factors to the slower growth, including:

  • A high number of off-lease vehicles are now saturating the market, softening remaining values for newer pieces of higher-priced inventory.
  • Since 2012, the number of vehicles 3 years old or newer sold at franchise used dealers has been climbing. This shift is helping to push the overall average transaction price up.
  • New vehicle sales have begun to slow down, causing OEMs to increase incentives and putting downward pressure on near-new used vehicle pricing.

“The dynamics of the used car market are completely different now than they were five years ago, and we don’t see this trend reversing anytime soon,” said Ivan Drury, Edmunds senior manager of industry analysis, in a news release.

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