Outlook on the Used Vehicles Market in 2014

The used-car market in the United States has been seeing a lot of action. Both buyers and sellers are excited about the market and are seeing a huge potential in the business. This development has prompted even franchised car dealers who deal in new cars across the nation to give more attention to their used-vehicle operations. Some are even opening stores for used cars exclusively. So why are the franchisers gung ho about this market? The market is huge and a large part of it is untapped by franchised new-car dealers. In the US, as the developing economy, the ratio of new car sales to used car sales is increasing at a steady pace. At present, it is 1:2.5, which implies that for every new car sold, more than two pre-owned cars are sold.

Used car market in 2014

The used car market in 2014 has shown a stable performance thus far. Going by the positive Manheim Index, at least the first two months of the year have given a solid performance. Though it is not as good as it was in 2011 and 2012, where it saw a historical high. Car buyers and experts are seeing more profitable sales of used-vehicles as compared to the sales of new-vehicles. Citing CNW Marketing Research, the Manheim 2014 Used Car Market Report says the franchised new-vehicle dealers in the US sold 15.6 million used vehicles like the Lincoln Mark IV in the year 2013, which was about the same as the sales of the new-vehicles. The total sales figure for the used-vehicle during the last year was almost 42 million. This figure also included sales by individuals and independent used-car dealers. Recently CarMax, the largest used-car retailer and a Fortune 500 company, garnered data from its more than 130 stores from locations all across the US. Statistics of cars of various makes and models that were test driven and sold between March 2013 and February 2014 were recorded. With this data, the company released its first ever used car report. According to the report, Nissan Altima was named the most popular vehicle, both in test drives and sales. Following the Altima was the Toyota Camry, Honda Accord, Honda Civic and Ford Escape. These models were included in the list on the basis of their test drive records.

Of these the most noteworthy details of the test drives versus sales data is the Ford F-150. It stood at the sixth position on the sales list but couldn't secure a place in the list of top ten vehicles with respect to test drives. This stamps the fact that the F-150 has many loyal customers; of which many of them didn't even bother to go for a test drive. Even the data from the used car research site, iSeeCars.com suggests that the Ford truck is a popular vehicle. However the Honda Accord was ranked as the top choice in major urban markets in the U.S. It was also surprising to note that a luxury car, the BMW 3 Series, also found a place on this list.

Here's a list of the most popular used models in the 20 biggest cities in the U.S. during the last year, along with their market share in the city in descending order:

  • BMW 3 Series in San Francisco-Oakland-San Jose, CA (3.9%)

  • Honda Accord in Atlanta, GA (3.5%)

  • Ford Fusion in Detroit, MI (3.2%)

  • Honda Accord in New York, NY (3.2%)

  • BMW 3 Series in Los Angeles, CA (3%)

  • Ford F-150 in Dallas-Ft. Worth, TX (3%)

  • Ford F-150 in Houston, TX (3%)

  • Honda Accord in Washington, D.C. (2.8%)

  • BMW 3 Series in Miami-Ft Lauderdale (2.5%)

  • Honda Accord in Boston, MA - Manchester, NH (2.5%)

  • Honda Accord in Philadelphia, PA (2.4%)

  • Chevrolet Impala in Cleveland-Akron, OH (2.1%)

  • Chevrolet Malibu in Chicago, IL (2.1%)

  • Honda Accord in Tampa-St Petersburg, FL (2%)

  • Honda Accord in Orlando-Daytona Beach, FL (2%)

  • Ford F-150 in Seattle-Tacoma, WA (1.8%)

  • Toyota Camry in Sacramento-Stockton-Modesto, CA (1.8%)

Going digital to increase profits

According to the data from used-car auction giant Manheim, nearly 1.7 million vehicles entered the used-car market last year after their leases came to an end. To manage such huge inventory, dealers are exploring new methods to interact better with the buyers. Just like a majority of players in the automotive industries, the used car dealers are also tapping digital ways to enhance their profits. George Athan, vice president of sales at DCH Auto Group of South Amboy, N.J. says, "We really need robust, high-performing used-car sales in our stores." Athan says that such stores generate service and parts business and also repeat customers. Online auto auction sites are yet another source of salvage vehicles. Potential customers can bid on and win their favorite vehicle. There are vehicles of different make and models.

With the improvement in the economy, the demand for new cars has also increased, which broadly implies that there would be more used cars in the pipeline. According to Manheim, around 2.1 million off-lease cars are expected to hit the market this year. This figure could rise to more than 3 million by 2016. Nevertheless, as the new car owners are increasing their consumer benefits, the used car market is likely to get a dent.

How can the used car market get hurt?

Industry experts are foreseeing that the used-car prices would get hurt with the announcement of the incentives from the new-car players. Typically, these two markets play off each other and the development is likely to intensify it. Automakers are looking at increasing their consumer incentives as they are aiming at increasing their sales and market share. This would impact the used-car market. Gains in new-car volumes are also pressuring used-car prices. Even the leasing of vehicles has increased. Once considered extinct, the leasing of cars is again gaining popularity. In fact, the leasing of vehicles takes place in one in four vehicle deliveries.

Keeping in mind all of these things, it looks like the used car would be facing a tough year in 2014. Still, it can be noted that the used vehicles are popular among the buyers and this scenario may be a passing phase.