CNW: Used Sales Off to Quick Start in 2011

The used-vehicle market in January has been more robust year-over-year across the board, and overall used sales in the U.S. are expected to improve more than 3 percent from the first month of 2010, according to CNW Research.

Specifically, the market is projected to move more than 1.95 million used vehicles during the month, up 3.4 percent from about 1.89 million vehicles in the year-ago period.

Franchised dealers are likely to see their used sales hit 685,000 units, up 4 percent year-over-year, and independents are expected to see a 2.1-percent gain at 682,000 used vehicles sold, CNW noted.

Private-party sales are predicted to come in at 585,000, which would be a 4.4-percent lift.

“On the back of strong demand, franchised new and independent used dealers as well as the private-party market, are seeing an increase in sales during the opening days of January,” said CNW president Art Spinella. “Total industry should be up between 3.4 and 3.6 percent.”

As far as transaction prices, franchised dealers have seen a 1.37-percent increase and independents have climbed 0.92 percent.

While dealers have more used vehicles at their disposal these days and aren’t as pressed for supply as they were last year, there is still persistent softening in the number of used units available, according to CNW. 

In January 2010, the used inventory level was at 55.12 days’ supply. That increased to 56.84 days’ supply in February, before shrinking down to 53.58 days’ supply by December.

The preliminary level for January 2011 is 50.83 days.

“While 45 days’ is considered ideal, it’s a figure that hasn’t been reached in years,” Spinella explained. “But the December and preliminary January data suggests it is fast approaching.

“Demand for used cars and trucks continues to heat up relieving dealers of inventory almost as quickly as it can be displayed,” he continued.

Interestingly enough, Spinella suggested that although consumers have become “more demanding,” many are choosing not to wait to buy the precise model they want but instead buying a vehicle that is fairly similar.

He also noted that approximately 85 percent of used-car purchases are to take the place of a vehicle thought to be no longer usable.

Moving along, the analysis also delved into the Web’s role in the used-car market.

CNW found that social networks have increased their presence in the sales process. Furthermore, they helped boost the sales rate of the Web, Spinella noted.

During December, “Better than 69 percent of all available used-car inventory was advertised or offered on the (Web) with 25 percent being sold within two months,” he shared

About 3.5 million used advertised on the Web in December, compared with around 2.3 million in January 2010.

Continuing on, CNW shared some data regarding same-brand used sales at franchise dealerships. Perhaps not surprisingly, the company found that used sales (non-certified pre-owned only) for franchised stores are comprised mostly of units from that particular brand.

“While that may seem only logical, the fact is much of the used inventory is contingent on what the local market is demanding, regardless of brand and what is being traded in,” Spinella noted.

CNW discovered some varying trends among franchised dealers among a few automakers it examined.

Beginning with Toyota, CNW found that the percent of non-CPO used sales for its dealers that were same-make vehicles was at 83.2 percent in 2010, down sharply from the levels seen through the 2000s.

For a while, former Toyota buyers were the automaker’s go-to demographic for its new sales, Spinella noted. With Toyota having such a strong reputation, the automaker’s dealer body made sure they had plenty of Toyota’s used products in stock.

And every year from 2002 through 2007, the proportion of non-CPO used sales comprised by same-make units was above 90 percent, but it has declined every year since.

“Legacy buyers — older now — weren’t trading in their existing Toyota as quickly and the company’s own quality issues were forcing dealers to stock up on hot brands other than Toyota to keep volumes high,” Spinella noted, referring to the decline that began in 2008.

“In fact, in calendar year 2010, Toyota dealers sold the fewest used Toyotas from their lots since CNW began keeping records in 1990,” he continued. “That matches the fact that as share of used inventory, non-Toyotas are beginning to increase at that brand’s dealerships.”

Moving over to Ford, its dealers have experienced a different sort of trend.

While they, too, have seen their proportion of same-make non-CPO used vehicles decrease recently, the impetus has not been the same as Toyota.

“Ford is at the other end of the room. While historically Ford dealers were forced to keep non-Ford models on their used lots for survival reasons, the fall in good non-Ford trade-ins kept dealers in the Ford lanes at auctions,” Spinella explained.

Ford’s robust Red Carpet Lease returns helped create a strong demand for and plethora of low-mileage, later-model used units during the late 1990s.

Specifically, the amount of Ford dealers’ non-CPO used sales composed by same-make models was 86.2 percent in 1999, but it has trended downward in the 2000s.

Spinella noted that “because of the dearth of quality used vehicles and an influx of non-Ford trade-ins because of high regard for many of its new products, the share of Fords on the used-car lot has fallen to below 80 percent for the first time in decades.”

Over at Nissan, its same-make sales are in very low numbers compared to its rivals. During 2010, only 56.4 percent of non-CPO used sales for franchised Nissan stores were for Nissan vehicles.

Thus, Nissan dealers lean greatly on non-Nissan products on the used side.

“The demand for many of the Nissans on used-car lots is weak and to survive requires having locally hot products if possible,” Spinella pointed out.

Though their numbers are much higher and tend to be trending upward, Chevrolet dealers have experience some of the same trends as Nissan in the last two decades. In the 1990s and 2000s, non-Chevrolet inventory has been a must for the brand’s dealer body to not only entice used-car shoppers but “fill in inventory gaps,” Spinella suggested.

“As sales got weaker, there were fewer Chevys to put on those lots,” he explained. “That’s changing, as the data suggests. Higher regard for Chevrolet products in general has made non-Chevy owners visit Bow Tie stores.

“But Chevrolet still leans too heavily on GM legacy owners for trade-ins, many of which are of the old-GM, meaning poor quality — cars that can’t help the dealer unless seriously discounted,” he continued..

Offering some more context, Spinella offered some more context, emphasizing that cross-shopping and non-traditional channel usage has become commonplace in the used market.

Not only that, “Superstores are major competition and dealers are honing skills to find the right mix for their individual markets to remain hearty. Declines in legacy buying, either new or used, is slowly, but surely, becoming the new reality.”