BANDON, Ore. -

Auto Remarketing reached out to five industry analysts Wednesday to obtain their perspectives on how used-vehicles sales might behave in 2011.

Each one pointed toward  toward positive gains in the industry stemming from factors such as a slowing improving economy, thawing credit availability, pent-up demand and new-vehicle sales on the move upward, too.

Art Spinella, president of CNW Research, pinpointed this year’s used-vehicle sales to come in at almost 40 million units, combining franchise and independent dealer activity as well as private-party sales. Spinella indicated it’s the first time sales could approach that mark since the figure hit 41 million back in 2007.

“Generally everything is looking fairly positive,” Spinella told Auto Remarketing. “It’s not going to be the best year, like 2005 when it was about 44 million units sold. It will probably be the best year in the last four.”

Spinella believes access to credit and rising pent-up demand are the two reasons why used-vehicle sales should be healthier in 2011.

“The pent-up demand has been growing fairly significantly month over month,” Spinella indicated. “The thing that’s critical about that is those people who are or have been postponing making an acquisition. Over 95 percent of them now are saying they’ll make an acquisition sometime within the next six months. Even though there’s been a lot of people who have dropped out of the market and didn’t buy something, the vast majority of them are now saying they’ll be back and intend to buy something rather soon.

“On the financing side, one of the things we’ve seen is that the application approvals have started to reach further down in the FICO scores,” he went on to say. “More people with lower FICO scores are getting approved than we’ve seen in easily the last three years, which is a rebound from where it’s been. It literally was if you had a FICO under 670, getting financing for a used car was horrendously difficult. Now we’re starting to see the average FICO score down around 640 or 650 not being unusual. It’s beginning to be looser credit. But it’s still nothing like it was in 2006 or 2007.”

Jesse Toprak, TrueCar.com’s vice president of industry trends and insights, didn’t calculate a specific figure for this year’s used-vehicle sales. But Toprak believes the retail market should enjoy double-digit growth over last year.

“We’re still not going to have ideal conditions for lending but we’ll have better conditions than we did in 2010,” Toprak shared with Auto Remarketing. “Financing is the biggest obstacle for used-car buyers nowadays. As lending improves, it will have a positive impact.”

When looking at how used-vehicle sales might perform, Alec Gutierrez, lead analyst of vehicle valuation at Kelley Blue Book, emphasized to keep watch on two economic factors. The first one he mentioned was nationwide unemployment, which at last check hovered at about 9.8 percent.

“A lot of projections we’ve seen are unemployment is expected to remain at 9 percent or above through 2011, which is still relatively high compared to what we’ve seen in the last 10 years,” Gutierrez offered. “We think as the unemployment rate remains high and struggles to come down the pace we’d like to see, we think there’s still going to be a strong demand for used vehicles in the marketplace.

“There’s a little bit of a substitution effect,” he continued to Auto Remarketing. “There are folks out there who need to buy used vehicles. They’re looking to shop used rather than new just to make a budget-conscious decision and try to save a little bit of money at the end of the transaction.”

The other point the KBB analyst raised was connected to gas prices, which climbed above $3 per gallon nationwide as 2010 closed.

“This maybe is not going to affect the total number of used vehicles sold, but it’s certainly going to affect the types of vehicles that are purchased and traded-in on new purchases,” Gutierrez insisted. “Gas prices went up steadily in 2010 and picked up steam a little bit going into December. Many analysts predict gas prices will continue to go up in 2011, but there’s quite a variation in the pace of that rise.

“As they go up, we’ll potentially see shoppers shy away from SUVs and trucks and shift preferences to more fuel efficient crossovers and compact cars, maybe even hybrid vehicles if gas prices reach a certain threshold,” he added.

Jonathan Banks, executive automotive analyst for NADA Used Car Guide, also kept unemployment figures and gas prices at the forefront of his thinking when looking to what the used-vehicle market might do in 2011.
“The relative uncertainty in these economic conditions creates a positive environment for used car prices during 2011,” Banks surmised.
“Firstly, expectations for new vehicle sales remain reasonable with forecasts pegged at about 12.5 million units,” he continued. “This should alleviate the need for high discounting which puts pressure on the used market. In addition, used-vehicle demand should continue to outpace supply since many consumers will continue to remain cost conscious and the flow of used vehicles returning to market will remain tight.”

Finally, Joe Spina, a senior analyst with Edmunds.com, noted the site is still formulating is used-vehicle sales forecast, which would ultimately only include activity at franchise dealers. Nonetheless, Spina is expecting used-vehicle sales to be stronger in 2011 thanks to greater wholesale supply.

“Supply has been a big factor hampering used sales,” Spina shared. “As more new cars sell, we’ll see more trades so that will help dealer supply a bit.

“One of the primary things is lease returns over the years have been down,” he went on to say. “There’s been a shortage of those vehicles, but that’s going to turn around. Leasing has been pretty strong throughout 2010 industry wide. There will be supply from that increase down the road.”