US used vehicle sales drop 6% in first quarter

Automotive News reports that industry wide used vehicle sales have dropped 6% in the first quarter. What does this say for the auto-industry? Are more people moving towards new cars? Is it because the price difference is not very significant?

The Prof recently purchased a new car, stating that the price difference between new and used was not very significant. My thoughts are dealerships are coming up with competitive pricing in order to boost new car sales. Also new models are continuously coming out making used cars be obsolete quicker.

Henry Ford’s used Model T car was his biggest competitor for sales of new Model T’s because there was no design difference year to year. We met with Ford’s VP of Design J Mays while in Detroit. He was very fun and interesting to talk too. He said that Ford is always designing a few new models at any given time in order to appeal to the changing culture. People are drawn to new models and it takes a few years to design each model therefore they must adapt and have new models coming out continuously.

It will be interesting to see the comparison of used vehicle sales increase/decrease in the second quarter compared to new vehicle sales increase/decrease.

2 comments to US used vehicle sales drop 6% in first quarter

  • 1. I’m not sure how used car sales data are compiled. This could represent people holding onto their used cars longer, and not selling them on to someone else. Cars are often sold 3 or more times over their useful life.

    2. What matters most is the differential between low-mileage used cars and new cars, particularly when you have off-lease cars of a make that continues to be made / new cars sold. In 2009-2010 very few new cars were sold, so there were very few 2-year-old cars into 2012. The market is slowly normalizing and the differential between new and used is widening so by next year you will again want to think more seriously about not buying new.

  • tommd13

    I agree with the professor, with fewer quality used cars, the corollary is an expectation that owners either keep what they have or trade up to a somewhat better used car with a relatively higher price that reflects the scarcity of quality used cars. The majority of customers today finance their purchases and the interest rate on a used car is usually higher than on a new car.

    The higher price of a quality used car coupled with the higher interest rate often makes the monthly payment on a new car more attractive, especially with the customer incentives manufacturers provide to purchase a new car. As the 2013 model year comes to a close, some dealers will have excess inventory on their lots and manufacturers will increase incentives to clear the lots. The logical result is to expect used car sales to continue at lower levels.

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