Used market, inventory ‘mismatched with demand’

SANTA MONICA, Calif. - 

Used sales were down by about 3 percent from last year’s performance in the third quarter. According to the Edmunds "Q3 2017 Used Vehicle Market Report" released earlier this week, the drop was caused by a slowdown in used-vehicle sales in Texas and Florida due to recent hurricanes.

In Q3, there were a total of 9.36 million total sales; compared to 9.67 million sales during the same quarter of 2016. This past quarter, 2.9 million of these used vehicles were franchise used sales, while CPO sales came in at a total of 678,960, according to the Edmunds report. 

“CPO sales continue to benefit from the abundance of off-lease inventory and represented 23 percent of all franchise used sales,” the report stated.

The report also pointed out that used-vehicle prices are edging higher due to strong sales of trucks and SUVs. The average transaction price for a retail used vehicle in Q3, according to Edmunds data, was $19,402, which is up 0.9 percent from the same period last year.

As for what’s causing the upward trend, Edmunds has this to say: “The share of sales of 3-year-old and newer vehicles has stabilized and isn’t pulling the average toward higher ‘near new’ pricing as that segment had in the past.

“However, pricier light trucks bought new at retail and for rental fleets have still managed to push used prices higher,” the report continued.

Another trend that could be driving prices higher for used cars? More lower mileage vehicles. According to the report, average mileage on used vehicles is dropping. Since Q3 of 2012, the average number of miles on a used-car transaction has dropped 14 percent.

Edmunds attributes this trend to “the pipeline” of low-mileage lease returns that are hitting the market.

But this could potentially cause issues for dealers as Edmunds shared newer and lower mileage used units are sitting on dealers lots while consumers instead choose older and less expensive vehicles.

In other words, the used market and inventory is “mismatched with demand,” Edmunds pointed out. Shoppers are looking for cheaper and older used models, but the market is flush with 3-year-old and newer used pre-owned vehicles. And the flow of lease returns is not expected to slow anytime soon.

“Within the next few years, we will continue to see the population of off-lease used vehicles swell, which is likely to drop their values due to market saturation,” Edmunds said. “This trend is likely to put pressure on the market downstream when their values become closer in line with those of older and higher-mileage vehicles.”

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