The volume of late-model vehicles at auction continued to move upward in August, according to J.D. Power Valuation Services, which said full-year figures are likely to end up with a similar volume increase as last year’s uptick.
And through eight months of 2018, SUVs are showing some of the largest increases in volume.
Overall, though, there was a 13.8-percent month-over-month hike and a 5.4-percent year-over-year increase in late-model auction volume during August, J.D. Power said in its latest issue of Guidelines, defining late-model as vehicles 5 years old or newer.
Through eight months, late-model auction volume is up 4.5 percent from the same period of 2017. But by year’s end, J.D. Power is forecasting that gap will increase to 6.5 percent.
That’s a similar gain as was seen last year, when late-model auction climbed 6.6 percent, J.D. Power said. As for next year, that’s likely to be the crest of this auction volume wave, which should plateau after 2019, according to the report.
Reasons for overall late-model increase
As you might expect, the main reason for the expected full-year auction late-model volume hike in 2018 is off-lease volume, which J.D. Power forecasts will climb 14.2 percent.
Rental volume is likely to climb 8 percent.
The company is projecting regular retail purchase volume to go up 2.7 percent.
SUV volume up big
SUVs are leading the pack in terms of year-to-date late-model volume gains through August, with a 49.1-percent hike for compact premium SUVs and a 28.1-percent gain for large SUVs, according to the Guidelines report. (Cars were still outpacing trucks 52 percent to 48 percent in terms of share of volume, though).
And not only are SUVs flowing through the auction lanes, they’re now representing a core focus from automakers on the new-vehicle side.
During a phone interview earlier this month, Jonathan Banks — who is vice president of vehicle analysis and analytics for J.D. Power Valuation Services — discussed the investment that automakers have made in SUVs and crossovers and how that has affected demand.
Heavy OEM investment in crossovers, SUVs
“When you think about it, the manufacturers are investing so much on getting the design right for these products, and launching more and more products, to meet exact buyers’ preferences, to me it’s no surprise that you’re starting to see more and more demand for these products. They’re getting newer, there’s more of them — and that’s happening for both the traditional SUVs and for the crossover SUVs …,” Banks said.
“It’s funny because everyone says, ‘No one wants cars,” he said. “(However), when you start pulling away investment from one thing and invest heavily on another thing, what you’re going to do is create a substitution to whatever the newer products are.”
That said, “even if they didn’t do anything to SUVs, people would probably be migrating over,” Banks acknowledges.
In other words, the investment in these segments is kindling to that fire.
Banks said that for consumers, “you have a crossover for every solution that the cars maybe gave you. You go into dealerships now that have a whole breadth of SUV lineups, like a lot of luxury manufacturers.
“And you basically have a crossover or SUV at every price point for every person with all the different driving dynamics that you would expect, that we used to expect in cars,” he said. “So, the investment’s all there, mainstream and luxury, to where there’s a crossover for every person now.”
It has gotten to the point where the shopper doesn’t have to compromise; whether his or her taste is for off-road capabilities, smooth handily or sportiness, there is likely a model for that consumer, Banks said.
Again, the investments in these amenities are moving folks to crossovers.
“And then obviously we have fuel prices keeping everything stable overall,” Banks said. “To me, all the investment is panning out perfectly and if not anything (else), accelerating a trend that maybe would have stopped at a certain level, but accelerating that shift from car to truck buyers even more.
“And that’s why we’re probably going to see that continue, especially as we start to see … less and less investment in cars, like what Ford’s doing,” he said.
Taking away investment in cars segments will likely lead to a similar scenario as a few years back, when consumer interest moved away from cars and towards SUVs.
“We flipped back (to cars) and now we’ve flipped back again,” he said.
‘More of a long-term trend guy’
Banks caveats that with a grain of salt, though.
“I’m more of a long-term trend guy, where I think everything is exaggerated again, to where I don’t think we should bail out on cars completely nor do I think that we should stop investing in cars completely,” Banks said.
However, the market could be approaching a “paradigm shift,” where the next time the market shifts perhaps it even goes to electrics.
At any rate, he emphasizes that fuel prices are likely to go higher and cause a bit more of a financial pinch on drivers’ wallets.
“You feel it now,” he said of forecasts for $2.75/gallon gas. “And I think people are really going to feel it at $3 and cars are going to be more fuel efficient. But the fact that we’ve invested so much in crossovers, it’s no surprise that everyone’s migrating towards those segments.”
Banks is among the collection of experts on tap for , the series of industry-leading conferences that begin on Nov. 12 in Scottsdale, Ariz.