SOUTHFIELD, Mich. and NEW DELHI, INDIA -

A new year has begun, and predictions for a prosperous year for the country's new- and used-car markets are pouring in. Factors such as increases in available trade-ins and high demand are expected to boost used sales, while numerous redesigns may ramp up the new market.

According to a study released from Indian firm Ken Research titled, “The US Used Car Market Outlook 2016 – Driven by Late Model Used Cars,” the nation’s used-car market revenue is expected to reach close to $480 billion by 2016.

Providing some background to these numbers, officials pointed out that in 2006, as the economy began to slow down, used market revenue came in at $340 billion and grew less than 1 percent during 2006–2011.

What is pushing this expected boost?

The report cited the “high average prices of used cars” as the main factor behind this growth.

“Average prices of used cars, price of gasoline and diesel, improvement in the access to F&I services, increased sales of new cars which will ensure the availability of late-model used cars, consumer confidence will drive the U.S. used-car market in the future,” the firm’s research analysts further explained.

The company also predicted that hybrid used vehicles will continue to gain market share.

And with new light vehicle registrations in the U.S. in 2013 expected to rise 6.6 percent over 2012 levels to 15.3 million vehicles, according to Polk, a boost in trade-in rates may bode well for the used market, as well.
 
“Used-car sales and new-car sales are complementary in nature, if the prices of one incline the other kind will also follow suit. Sales of new cars will determine the size of future used car inventory,” Ken Research shared.

 Breaking down Polk’s analysis in greater detail, the company also expects production rates to jump, increasing to the 15.9 million unit range (an anticipated 2.4 percent increase from 2012), driven by an improving economy and capacity expansion in the region.

In fact, consumers and dealers in the U.S. may be on board for an exciting year in the automotive world. According to Polk, new-vehicle introductions in 2013 will increase significantly, with 43 new vehicle introductions in the U.S. planned for the year, up nearly 50 percent over 2012 levels.

Moreover, over 60 vehicle redesigns are expected to hit the lots in 2013, according to Polk.

“Polk expects continued recovery in the industry in 2013 and 2014, a positive sign for the U.S. economy,” said Anthony Pratt, director of forecasting for the Americas at Polk. 

“The auto sector is likely to continue to be one of the key sectors that lead the U.S. economic recovery, however, we don't expect to realize pre-recession levels in the 17 million vehicles range for many years. However, our baseline forecast hinges on Washington's ability to draft a budget plan that will avoid $600 billion in spending cuts and tax increases,” he continued, noting decisions in Washington may play a key role in how the automotive industry continued recovery pans out.

Polk also is predicting that the U.S. automotive market will return to pre-recession production rates by 2016. The company shared it expects a return to 16 million units in the U.S. by 2015 at the latest, a rate last achieved in 2007.

Officials went on to share there are a few segments that may be playing a key role in pushing new-vehicle registration rates this year.

First, the large pickup truck segment, which has declined over the past five years, “will likely grow with several important new launches in 2013 and into the 2014 model year, with GM, Toyota and Ford planning to showcase redesigned vehicles in this segment during the next 18–24 months,” Polk said.

“Increased marketing activity to support these launches, together with a recovering market for new housing starts, which impacts registrations of new pickup trucks within the construction industry, will result in growth in this segment in the coming year,” it continued.

Perhaps not surprisingly, the midsize sedan segment is expected to continue to lead the industry, pushed largely by redesigns.

“Recent redesigns of nearly every vehicle in the mid-size segment are forcing more competition and continued growth,” said Tom Libby, lead analyst for North America at Polk. “The current array of options for consumers in the market for a new midsized vehicle makes it a great time to buy a new car.”

Furthermore, the company also urged those in the industry to keep an eye on the luxury segment, as well, “as it will see significant launch activity within its compact sedan segment, which currently accounts for 2.9 percent of the overall industry.”

Also, if gas prices continue to fall, Polk analysts expect the small luxury crossover segment will continue to swell. 

Lastly, Polk also forecasts the industry will experience continued growth in the compact and subcompact segments, as OEMs are introducing several new models in the coming year. 

“This anticipated growth is largely based on increasing CAFE requirements and significant new product launch activity in the U.S., as well as increased interest by younger buyers just coming into the market,” said Libby.