31 Dec 17

U.S. second-hand vehicle market to grow 1% in 2018

The recently-approved federal tax cut and a healthy supply of utility vehicles are two factors predicting a growth of the U.S. second-hand vehicle market. Cox Automotive forecasts a growth of 1% in 2018.

In contrast, the automotive intelligence providers say the new-vehicle market will experience flat sales in the next year. 

39.5 million units
According to Cox, used-vehicle sales in the U.S. should reach 39.5 million units over the whole of next year, about 400,000 units more than the 39.1 million used vehicles sold in this year. The figure for new-vehicle sales for this year as well as the next is 16.7 million.

The second-hand market is now undergoing the shift experienced by the new-vehicle market, towards more compact SUVs.  

Off-lease cars
"The mix of off-lease cars is improving and falling more in line with consumer demand," Cox analyst Charlie Chesbrough was quoted by Automotive Fleet. "The large amount of off-lease vehicles in 2018 and beyond will include more SUV/CUV-type vehicles, which have been in such great demand. That will help."

The tax cut signed into law by President Donald Trump on 22 December should help the used-car market, by doubling the standard deduction and giving workers a larger disposable income. This extra money could be used towards finance new vehicle leases or purchases.

Household income
According to Chesbrough, “used-vehicle sales will benefit the most. The average household income of a buyer in the used market is $70,000 (€58,000) vs. $100,000 (€83,000) in the new market. While the nominal tax savings will be largest among high income Americans, vehicle affordability will improve the most and across the broadest base for lower income brackets. The expected impact on the used market will be to improve both quantity and quality."

Organic growth in the used-vehicle market is a trend that started in the U.S. about two years ago among fleet remarketers, “and we expect that trend to continue in 2018”, said Chris Clarke, remarketing manager for ARI North America. 

Growth trend
While the new-vehicle sales market is expected to be flat in 2018, used-vehicle sales should propel a growth trend that began two years ago among fleet remarketers, Chris Clarke, ARI's North American remarketing manager, told Automotive Fleet.

"We are also seeing a shift by certain clients as well the broader market to a higher adoption rate of small SUVs in fleets and in the overall retail markets. With a continued diminishment of the popularity in many of the sedans over the last couple of years, it is expected that we continue to see increasing volumes in remarketing trending towards SUV vs. sedans."

Damaged or destroyed
"In 2017 the type of both dealer and commercial vehicles consigned at auction has been trending with dealer vehicle count down while the commercial vehicle count is up – the up/down shifts are almost equal in count, not effecting overall sales yet the formula on how we get to our total sales is different than in years past," said Penny Wanna VP of ServNet Auctions.

From August to October, used-vehicle sales in the U.S. increased about 2% - an effect of the replacement of more than 500,000 vehicles damaged or destroyed by hurricanes in Texas (pictured) and Florida. 

Authored by: Frank Jacobs