Advice to Auto Dealers: ‘Enjoy the Used-Car Market’

LAS VEGAS – Dealers during last decade’s recession were forced to rely on selling used vehicles to survive – and they got good at it, says Jonathan Banks, J. D. Power’s vice president-vehicle valuations and analytics.

“They created a used-car infrastructure that they are using today,” he says.

He predicts dealers will once again turn to their used-car department to offset an expected decrease in new-car sales this year, although the drop certainly is not anticipated to be as severe as it was in 2009 and 2010.

The new-car market is down but remains healthy, Banks says. The used-car market is more robust.

“Dealers like to make money, and used cars are a way to make money,” he says during a presentation entitled “The Golden Era of Used” at J.D. Power’s annual Auto Summit held in conjunction with the National Automobile Dealers Assn. convention and expo here.

Ironically, although new light trucks (SUVs, CUVs and pickups) with nearly 75% of the U.S market share outsell cars, car prices outperformed SUV prices for vehicles up to eight years old, according to J.D. Power.

Small-car prices were up 7% in 2019 compared with 2018. Used large SUV prices rose 1.2%. “It’s because of the diminishing supply of cars,” Banks says, referring to domestic automakers cutting back on car production in favor of light trucks.

But some things don’t change. For example, Banks says younger consumers drive the used-car market. That’s because they typically lack the wherewithal to buy new vehicle. As a used-car industry adage goes, “There is a ‘youth’ vehicle; it’s called a used car.”

Older members of Generation Z who are entering the vehicle market for the first time are more likely to buy a pre-owned passenger car, Banks says. Millennials make up 36% of the used-vehicle market compared with 25% each for Boomers and Generation X.

Banks advice to dealership used-car managers: “Don’t ignore cars.”

He tells dealers: “Enjoy this used-car market. We may never have anything like it again.”