CARY, N.C. -

The used-vehicle market appears off to a good start in 2021, with January sales expected to beat both year-ago and December figures.

TrueCar estimates in a forecast released Tuesday that there will be 3.2 million used-car sales this month. That would beat January 2020 by 1% and December by 10%.

In a related analysis, Cox Automotive chief economist Jonathan Smoke wrote in Monday’s Auto Market Weekly Summary, “Used-vehicle sales are likely to end January at least as strong as December, and momentum is improving. Used-vehicle values also are increasing.”

Looking at used retail in particular (sales involving a dealer), Smoke said last month showed continued momentum in sales, and that despite January typically being a slower month, last week’s sales were stronger than the prior week’s.

“Conditions suggest we will at least see a similar performance in January as we saw in December,” Smoke said.

And in a Market Insights report Tuesday, Black Book said that better-than-usual January for dealers may be attributable, in part, to the recent federal stimulus.

 “Dealers continue to report an uptick in used retail sales, particularly when compared to a typical January, and some dealers are now attributing the uptick to the $600 stimulus that came at the end of 2020. New retail demand is also still doing well, but dealers are reporting a slowdown in activity compared to December,” Black Book said in the report. 

Shift from new to used?

And some consumers may shift from new to used, amid new-car transaction prices that have softened from record highs in December but are forecasted to be 4.2% higher year-over-year, according to TrueCar.

“Average transaction prices have finally come down from the record-setting highs we saw last month, but are still higher than this time last year.  Of the bigger manufacturers, only Kia has an average transaction price below $30,000,” TrueCar vice president of industry insights Alain Nana-Sinkam said in a news release.

“We expect this trend to continue as consumers desire pricier trucks and SUVs. As new vehicle prices rise, we may see more price-conscious shoppers gravitate back towards smaller segments or the used-car market due to growing concerns around affordability,” he said.

And with automakers trimming car models from their new-vehicle lineups, this has led to fewer and fewer affordable alternatives amid such record transaction prices.

That, says Edmunds, “will create a barrier to entry for many consumers and force them into the used-car market.”

Perhaps to the tune of close to 500,000 shoppers, estimates Edmunds analyst Ivan Drury.

On Thursday, Edmunds shared several projections for 2021, one of which was that the new vehicles “will continue to grow more pricey and exclusive as the pandemic drives an income divide among Americans,” the company said in a news release.

In fact, the average price on a new vehicle last month was $40,753, a record high, Edmunds said.  And it’s likely to continue rising, driven by increased demand for pricier trucks and SUVs.

“Edmunds analysts expect this number to go up as affluent consumers benefiting from lower interest rates and healthy stock and housing markets continue buying bigger, more expensive new trucks and SUVs,” the company said of December’s record new-car prices.

This is likely to have a ripple effect on used cars, as many consumers are expected to be priced out of new vehicles, given the rising prices and lack of lower-cost alternatives.

In follow-up comments shared by Edmunds via email, Drury estimates a half-million consumers could turn from would-be new-car buyers to used-vehicle buyers this year.

His calculation is based on the 2014 sales volumes of models cut from automaker lineups for 2021, assuming a 6-year trade-in cycle, Edmunds said.

Full-year forecasts

As for where the total sales are headed in the used-car market, Edmunds is forecasting 41 million this year, up from an estimated 38.3 million sales in 2020.

TrueCar is forecasting 40.05 million total used-car sales for this year.

Cox Automotive is projecting used sales will climb to 39.3 million this year and 40.2 million next year, before moving down slightly to 39.8 million in 2023.

Cox Automotive estimated that used-car retail sales (those involving a dealer) fell from 20.8 million in 2019 to 19.5 million last year.

But those used retail numbers are expected to climb to 21.2 million sales this year, 22.1 million in 2022 and 22.4 million in 2023.