Throw storm-driven replacement demand into an already strong retail market, and you get what happened to the used-car business at the close of the third quarter.
The seasonally adjusted annualized rate of used-car sales eclipsed 40 million units last month, according to data accompanying the latest quarterly and monthly analyses from Cox Automotive.
Through nine months of the year, used retail sales are beating year-ago figures by 2 percent, a Cox Automotive spokesperson said in an email. The company is forecasting 39.1 million used retail sales for full-year 2017, he said.
In an analysis, Cox Automotive estimates that there was an 8-percent year-over-year hike for used-car sales last month.
The SAAR for used-car sales was at 40.4 million, compared to 38.1 million a month earlier.
And it’s later-model vehicles driving these gains. Cox Automotive’s data shows a 5-percent increase year-to-date in sales of used cars less than 4 year old — and this group has the biggest share of the pre-owned market, the analysis indicates.
On the pricing front, the company’s Manheim Used Vehicle Value Index reached a fifth straight record high (134.9). That’s also up 6.3 percent year-over-year, with wholesale prices climbing 2.77 percent. That capped a quarter the company said was “one for the record books.”
“While growing retail demand is strong, most of the pricing strength can be directly attributed to the recovery following Hurricanes Harvey and Irma,” Cox Automotive chief economist Jonathan Smoke said in a news release. “Both the replacement demand and reduction in available supply is causing widespread wholesale inventories to tighten, and we expect this to result in wholesale price gains for at least another month or two.”
In a summary of the damage from Hurricanes Harvey and Irma that was included in the report, Cox Automotive said it believes there were at least 600,000 vehicles that received major damage from the storms or were altogether scrapped after the storms.
Cox Automotive said that between last month, this month and November, drivers will likely replace 400,000 vehicles. And roughly a third (30 percent to 40 percent) of those will be new cars, meaning most will go pre-owned for that replacement car, the company said.
Either way, both new- and used-car sales should receive a nice lift these next couple of months.
As it stands, new-car sales climbed 6 percent for September and reached a SAAR of 18.5 million, according to the report.
Not since July 2005 has the new-car SAAR been that strong. And not in three decades has it been that strong in September, according to the analysis.
Staying on the new-car side, S&P Global Ratings said the market did see a modest uptick from the storms.
However, it is actually now projecting 17.0 million new-car sales this year, a dip from their prior forecast of 17.2 million. It would also be a 2.7-percent slide from 2016.
Further, S&P Global Ratings is calling for 16.8 million to 16.9 million annual sales in the next two years.
“In 2018 and 2019, we believe that U.S. auto sales may weaken slightly from their 2017 levels but stay at a relatively healthy 16.8 million-16.9 million units annually based on our expectation for steady U.S. GDP growth, housing starts, and gasoline prices,” S&P Global Ratings credit analyst Nishit Madlani said in a news release.