Used-car sales, revenues set record despite an intense year

Used-vehicle sales increased about one million in 2001 for a record 42.6 million units and a record $376 billion in revenue — all this in a year that brought intense pressure and unique conditions to the market.

Used-car prices were driven down in October of last year by an overabundance of used vehicles brought on by more than three million off-lease vehicles, a record number of trade-ins spurred by 0% financing and by rental companies — slashing their airport fleets because of less air travel — sending large numbers of vehicles to auction.

Used-car values, though, rebounded in November and are now at pre-Sept. 11 levels, according to Manheim Auction's Used Vehicle Value Index.

Prices rebounded because of the transparency of the auction system and its ability to provide a neutral setting for the interaction of supply and demand, says Tom Webb, Manheim's chief economist and author of Manheim's 2002 Used Car Market Report, an annual look at that industry.

The average price for a used vehicle sold by franchised dealers in 2001 was $12,275, according to CNW Research.

Used-car values bounced back after September because of the mix of vehicles being sold, says Tom Kontos, vice president of Industry Relations for the ADESA Corp.

“Prices probably are up because dealers are selling more used SUV's and luxury vehicles. Also, the manufacturers have been pushing their certified programs,” he says.

Independent dealers accounted for much of the volume increase with sales rising 6.3% while franchised dealers sales decreased 1.6%. But franchised dealers were able to increase average used-car net profit to about $240 per retail unit.

Webb attributes the profit increase to dealers' savvy in working the market. “Dealers have done a good job managing their inventories,” he explains.

Vehicles purchased through open fleet/lease auctions provided the most gross profit ($2,061 per vehicle) for dealers, according to the Global Vehicle Remarketing Report.

Says Kontos, who wrote the report, “Dealers probably were able to purchase them cheaper because of the glut of off-lease vehicles this past year.”

This bodes well for dealers because Webb is forecasting a record number of off-lease vehicles will return to the market in 2002 — approximately 4 million.

The trade-in, though, still remains a strong source of gross profit for the dealer. “The trades still do darn well,” says Kontos. “In past years, gross profit from the trade has been higher than the auction.”

Webb agrees dealers do well with the trade. He says, “Dealers were able to get good deals on the trade-in last year — they've been able to translate those to stronger grosses on the back end.”