New- and Used-Vehicle Markets In It Together

SAN FRANCISCO – Every used car starts as a new car. That’s why new- and used-car markets tie into each other.

There are plenty of other reasons, including trade-ins, front-end pricing based on back-end residuals and popularity of certified pre-owned programs automakers use to remarket their off-lease vehicles.     

The used-car market’s “increasing importance reinforces remarketing’s critical link in the automotive ecosystem,” says Tom Webb, chief economist at Manheim, an auction and remarketing-services company.  

Dealers know how the two markets play off each other. “You can’t have a successful new-car department without an efficient used-car operation,” Webb says at a press conference highlighting industry trends.

Those include growth in wholesale volumes, increases in overall vehicle sales and stability in wholesale pricing.

“While last year was a banner year for growth and stability in the used-vehicle market, we anticipate that we’ll see the sixth consecutive year of increased new-vehicle sales in 2015,”

New-vehicle sales reached 16.5 million units last year, the fifth consecutive annual increase.

At just over 42 million units, used-vehicle sales went virtually unchanged from 2013, increasing only 0.1%. But prices and demand remained strong. More than a few dealers say their used-car operations saved them when U.S. new-car sales dropped in 2008 and then free-fell to 10.6 million units in 2009.  

Leasing dropped to record lows back then, too. Now, because of leasing’s resurgence, franchised dealers will see a greater availability of used-car stock as off-lease vehicles make their way into the remarketing system.

Webb doesn’t share the belief that off-lease vehicles could glut the market. “Dealers will see a retail demand” for those units, Webb predicts, because, among other things, the U.S. economy is in good shape.

But the job market contains some contradictions. For example, Webb says more Americans than ever work, yet there are more part-time jobs that don’t pay as much.

The National Automobile Dealers Assn. chief economist says a softening of wages is an issue, especially when it comes to a consumer having the wherewithal to purchase a vehicle.  

That said, “overall labor markets have been supportive and will continue to support the auto industry,” Webb predicts.

And more people are confident they’ll keep their jobs, he says. Losing a job and the fear of losing one put people out of a car-buying mood, as evidenced during the recession.

“There is much greater job stability today,” Webb says. “The chances of losing a job are lower than ever before.”    

At the NADA annual convention here, Manheim released its 20^th annual Manheim Used Car Market Report containing and trend tracking for 2014. Here are highlights:

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