10% Supply Spike for Later-Model Cars
There will likely be a 10-percent increase in used vehicles ages 5 years old and newer in 2015 — and then expect continued growth for years to come.
That’s according to forecasting data released in mid-December by TrueCar, which projects a normalization in used inventory this coming year. That should come as welcome news for many dealers, who have dealt with a supply pinch in recent years.
“This is the last year we expect used supply to be impacted by the recession’s pullback in new-vehicle buying,” said Larry Dominique, TrueCar’s executive vice president and president of ALG, TrueCar’s residual value data unit, in the Dec. 18 analysis. “An increase of supply would benefit consumers shopping for used vehicles next year (2015) in terms of selection and potentially lower transaction prices.”
TrueCar’s data set includes a forecast of used supply (ages 1- to 5-year-old vehicles) through 2020, and each year between now and then shows an annual increase.
The same analysis also was projecting that full-year 2014 used-vehicle sales would finish at 37.0 million, a 3.3-percent year-over-year hike. The new-to-used sales ratio would be 1:2.2, compared to a ratio of 1:2.3 a year earlier.
TrueCar attributes the decline in the ratio to the fact that new-car sales, with an anticipated gain of 5.9 percent for full-year 2014, were expected to climb more rapidly than used-car sales.
Interestingly enough, TrueCar points out in the analysis: “During the recession, the ratio widened to as much as 1:4.0 when new vehicle purchases plummeted, which also curbed future used-vehicle inventory levels.”
Those levels, as TrueCar mentioned, are starting to right-size. That normalization, plus a six-year low for unemployment, has led to what TrueCar described as strong opportunities for both new- and used-car shoppers.
TrueCar data indicates that new cars were fetching 1.9 percent stronger transaction prices in 2014 (at $31,831) than they were a year earlier, and the increase on used cars was even more substantial. Buyers were shelling out 5.9 percent more, with average used-car transaction prices at $16,335.
The overall revenue from new- and used-car sales for 2014 was projected to pass $1.1 trillion, an 8.3 percent year-over-year gain.
TrueCar notes in its analysis that this hike in revenue, pushed by consistently solid demand, “comes amid sustained economic expansion, an improving job market, falling gasoline prices and a consumer shift to higher revenue segments, including pickup trucks and luxury vehicles.”