The used vehicle market is flourishing in the US. With the new car prices hitting another historic high, the used segment becomes increasingly appealing for buyers all over the US. There are a lot of changes we should expect to see in the US auto market in the following 12 months, mostly driven by the previously mentioned price trends.
Stingy interest rates and manufacturer incentives put a lot of strain on the auto market, on the new car segment. For most buyers today, purchasing a new car is an impossible dream. The used vehicle market is expected to continue its unprecedented growth, at least by 2020.
Today, the average price for new vehicles is estimated to be higher by 29%, up to $36,000. A decade ago, the median price for new vehicles was estimated at $29,000. The whopping process and the lack of affordability are driving a change in consumer behavior and expectations when it comes to transportation.
The annual rate for new car loans has also risen to 6.26% in February this year. The down payment for a similar loan was estimated at $4,200, in the same month. By all means, owning a new car is becoming more difficult for the American consumer. What are consumers doing, in this new context? They are holding more onto their current vehicles or they are turning their attention to used ones.
What Brings the Wind of Change?
New market trends are, like always, driven by consumer preferences and purchase trends. According to experts in the automotive industry, the most popular types of vehicles today are pickup trucks and SUVs. Naturally, the average price of these vehicles is higher than sedan prices. As long as the demand for similar vehicles will continue to grow, the prices will also register higher and higher average rates.
Is This the Car Recession Experts Talk About?
Automotive analysts clearly qualify the decline in sales for new vehicles as a car recession period. Although many expected to see the phenomenon take place in 2018, the market experienced a sales growth of 0.6%, marking the fourth consecutive year of growth.
According to German experts at The Center for Automotive Research and automotive manufacturers, the US market is expected to drop by 4% in 2019. At the North American International Auto Show in Detroit, automakers promise higher revenues than ever. But is this the reality?
The unemployment rates in Detroit are now at a historic low. This might trick us into thinking the automotive industry is thriving. In fact, factories in the sector are closing factories and cutting shifts, firing thousands of workers and acting like the recession is at the doorstep.
The outlook on the sector is gloomy, and buyers respond accordingly. Now used vehicles have their undivided attention.
Will Used Cars Replace New Ones?
With the new car market taking a dip, the used vehicle sales see to grow significantly. According to Statista, although the new car sales have remained at the same level in the past two years, the used car sales have grown sensitively from one year to the other.
But this doesn’t necessarily mean the used car consumer can be easily pleased, either. The migration to the used car market is reshaping it to the core. Consumers are still searching for quality and know what they want. With used cars today having a higher quality than ever, the consumer has plenty of options to choose from. Private sellers become more popular and the substantial savings buyers can make by purchasing a used vehicle is a strong motivator.
New Buyer Behavior
Consumers today are more likely to research the vehicles, model and make of the cars they plan to invest money in. They are less likely to let themselves convinced by dealership employees that the vehicle they search for is present in the business and ready to take it home. Experts also notice different research patterns when it comes to new vs. used cars. While the research rates of new cars are higher than for used ones, they are slowly dropping, as the prices go up.
Buyers – More Comfortable Shopping Online
While, traditionally, car buyers are not comfortable at all to buy vehicles online, this seems to become a myth. With VIN lookup tools and systems, all vehicles can be checked. Buyers can find out before purchasing a car if the mileage is the real one, if the parts have been recently replaced or if the car was involved in crashes. While buyers definitely do most of their shopping online today, they still profit from vehicle history tools and app to find out specifics about the cars they are interested in buying.
Although selling used car online seems to pose some challenges, sellers are ready to develop new strategies to overcome them.
Used Cars Purchase Trends
Specialists can outline several purchase trends when it comes to used cars. We already established the consumer today feels more motivated to invest in used cars, rather than new ones, but what types of vehicles do they prefer?
We mentioned previously that buyers seem to be more attracted by pickup trucks and SUVs when it comes to new vehicles. Well, the trend for used cars is similar. Sedan sales have fallen behind over the past few years. Even if the prices on utility cars are higher, the consumer feels motivated by lower prices. The utility and versatility these vehicles pose make buyers overlook the high maintenance prices or the gas consumption levels. Newer generation utility trucks offer some perks sends don’t.
- Ease of exit and entry;
- Higher ride height;
- Increased fuel efficiency;
- Driver assistance tools and systems, like parking assistance tools;
- Better overall comfort and extra features, like bigger cabins and heated seats.
What people are searching for in vehicles seems to be on the brim of change. With higher prices for new vehicles, 2019 seems to be the year where we’ll see the sales on used cars go through the roof. But this doesn’t mean that consumers will overlook quality.