Special Coverage

NADA Convention & Exposition

ORLANDO, FL – The used-car department always has been important to auto dealers, but “last year it was critical,” says Tom Webb, chief economist for Manheim Consulting, a division of a major vehicle-auction firm.

Although used-vehicle deliveries dropped in 2009, they didn’t fall off a cliff the way new-car sales did at many dealerships. Indeed, some dealers say their pre-owned operations kept them in business.

While franchised dealers’ new-vehicle sales dropped 21% in 2009, their used- vehicle deliveries slipped only 3%, Webb says in discussing findings in Manheim’s 15th annual Used-Car Market Report at the National Automobile Dealers Assn. convention here.

As the economy in general and the auto industry in particular took major hits, the used-vehicle market provided a degree of stability and profit opportunities, he says.

“In 2009, a well-run used-vehicle operation often made the difference between survival and closure.”

The trend-tracking report draws on Manheim’s proprietary data, as well as information from a variety of industry sources.

Among the highlights of the report, total used-vehicle sales declined for the fourth consecutive year, to 35.5 million units in 2009, while the peak-to-valley decline was just 20%.

Webb says that shows the pre-owned market is inherently more stable than its new-vehicle counterpart.

Total vehicle repossessions reached a record high of 1.9 million units in 2009, but likely will fall in 2010. “We’ve seen repossessions surge in the past couple of years,” he says, citing the poor economy that suddenly put many borrowers in dire straits.

“The rise in repossessions isn’t because of bad loans,” Webb says. “They were good loans that went bad. There’s a big difference.”

New lease originations fell to 1.1 million units, the lowest since leasing’s infancy in the early 1980s, the report says. The peak year of leasing was 1999, with 3.7 million deliveries.

“There is an increased ability and desire to lease, so we’ll see more of it this year,” Webb says.

Off-lease volumes rose to 2.7 million units last year. A modest decline in off-lease volumes in 2010 will be followed by steep declines in 2011 and 2012, a reflection of the recent drop in lease originations.

The report says auction volumes last year fell to their lowest level in a decade but are expected to return to “normal” quicker than new- and used-vehicle sales.

Webb says that’s due to the increased need for auction services by both buyers and sellers.

Wholesale used-vehicle prices rose 5.1% in 2009 due to reduced supply, stabilization in retail demand and a fall in new-vehicle inventory levels.

New-vehicle sales into rental fell 25% to 1.1 million units in 2009, the report says. The shift towards “risk” vehicles, now more than 70% of purchases, continued, and the average service life of rental units lengthened.

sfinlay@wardsauto.com