Used Car Market Industry Booming while Retail Prices are Dropping – Are you in the know?

August 14, 2017

The economic crisis in 2008 was a tumultuous time. The automotive industry took a blow to new vehicle sales and the annual vehicle production rate dropped from 17 million vehicles per year to under 10 million vehicles per year.

Question: Nearly ten years later, where is the market and in what direction is it going?

Answer: The automotive market is beginning to soften again.

Used vehicle supply is dramatically increasing as the 2014 and 2015 used cars enter the market. According to the National Automotive Dealers Association (NADA), used vehicle prices fell 8% February 2017 vs February 2016. Average retail incentives climbed beyond $3,000 for the first time since the recession in 2008. This is no surprise; it’s a natural result of the leasing push that has taken place over the past few years and exactly what was expected. Supply rebounded to 16.5 million units in 2014 and these units are entering the used car market now in large quantities, pressing
prices lower.

Here are some key market trends:

  • Lease deals are starting to decline as OEMs cut back production to control supply
  • Quality late-model used vehicles can be purchased for bargain prices
  • Competition from used cars is likely to drive new vehicle incentives up in 2018 and beyond.

So, what does this mean to the consumer? With the abundance of available low mileage vehicles, from compact to luxury, now is a great time to lease new and used vehicles.

Auto and Light Truck Sales Historical Chart
This interactive chart shows the monthly unit volume (millions) of light vehicle sales since January 2006. The current sales rate for autos and light trucks as of May 2017 is 16.58 million.

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