LOS ANGELES -

After releasing their report on new-car dealers earlier this month, IBISWorld came out with the Used Car Dealers in Canada Industry Market Research Report this week — a document containing numerous tidbits of good news for dealers looking forward.  

Attributable in part to rising consumer demand, IBISWorld predicts used-car dealer profit and revenue will continue to rise during the next five years to 2018.

“Rising demand for used vehicles, particularly for those five years and older, will likely drive anticipated used-car dealer industry growth,” officials noted.

Looking back a few years, IBISWorld industry analyst Radia Amari explained the the recession and the economic uncertainty that came with it pushed many more consumers into the used market.

“Beginning in 2010, however, the economy began to improve, and consumer spending began to rise again,” said Amari. “Moreover, consumers, still wary of the economic climate, increasingly opted to purchase used vehicles over new ones, helping to boost sales.”

Price-sensitive consumers have been increasingly opting for used vehicles over new ones, the company stressed.
The average price of a used vehicle is less than $13,000, while new vehicles average between $20,000 and $30,000, according to IBISWorld data.

“This renewed demand has remained consistent, and over the five years to 2013, revenue for the used-car dealers industry will grow at an estimated average annual rate of 2.1 percent to $7.0 billion,” officials shared.

As for prices, pre-owned rates have been high in the past due to used supply — a concern that is not expected to subside in the near future.

Rene Abdalah, vice president of RVI Group, said early in the year, “We expect used inventory to remain low in Canada for 2013, similar to what we’ve seen in 2012. According to the RVI Used Vehicle Stock Index, we expect a bottoming out at the end of this year before beginning to increase. On an annual average, though, 2013 will be lower than 2012.”

Bob Pierce, member services director for the Used Car Dealers Association of Ontario reiterated, “They (used cars) are in very short supply, and they are very expensive.”

For more information, see the winter edition of Auto Remarketing Canada Digital NewsMagazine here.

According to Amari, “The recession reduced fleet purchases and the number of leased vehicles, which has caused a shortage in the segment of used vehicles aged five years or fewer.”

The IBISWorld report also focuses on one trend that doesn’t bode well for industry growth in the next few years.

The company reported that many “firms are expected to forgo significant expansion of their operations.

“Rather than expanding into new markets with new locations, dealers will increase inventory at their existing retail outlets, hoping to leverage higher sales from an existing customer base,” it continues.

And this trend isn’t a new development.

Over the five years to 2013, the number of industry companies declined at an annualized rate of 2.3 percent to an estimated 6,498, IBISWorld reported.

And the number of companies is forecast to continue declining in the next five years, albeit at a slower annualized rate

For more information, visit IBISWorld’s Used Car Dealers in Canada industry report page.

Sarah Rubenoff can be reached at srubenoff@autoremarketing.com. Continue the conversation with Auto Remarketing Canada on LinkedIn and Twitter.