Recent reports on spring 2019 SAAR, used car retention rates, depreciation rates, and a shakeup in the Top 100 list of used vehicle retailers has signaled changes on the horizon in the pre-owned market.
Pre-owned vehicle SAAR from April 2019 is stronger than annual figures from 2018. Through the first quarter of 2019, nearly 10.5 million used vehicles have been retailed. Even though the used SAAR forecast is 40 at 40 million units to this point on the back of spring sales that defied an expected slump, speculation is that sales will soften through the rest of the year.
Another trend that’s proving enigmatic are used vehicle retention rates. Although the average retention rate is still 1.4% higher than this time last year according to the Black Book Used Vehicle Retention Index, vehicle retention rates have five consecutive month-over-month declines. Some segments continue to perform well including sporty cars, compact and subcompact cars, small and full-size pickups, and full-size SUVs and crossovers.
Black Book executive vice president operations Anil Goyal says, “Much of the 2018 activity was spurred by economic strength, resulting in significant demand for affordable used sedan values. It will be difficult to replicate that activity over the remainder of 2019.”
The declining retention rate among strong sales led to speculation in June’s Used Car Marketing Strategy Session. Are people getting rid of their cars sooner?
While retention rates are decreasing, used car depreciation rates are expected to climb throughout the rest of 2019. Many of the markers that helped drive depreciation rates down – low interest rates, loosened purse strings from lenders across the board, and 2018’s surprisingly strong and stable economy – have reached a plateau.
Naturally, on the back end of a plateau, a correction is inevitable. Analysts are predicting that depreciation rates will begin climbing from their current low of 12.5 percent.
Is it possible that lower used car retention rates have impacted used car depreciation?
Blowing the doors open on the pre-owned market is online used car retailer, Carvana. They’re quickly becoming a household name. Proof is in the pudding as they’ve debuted in the number 8 spot on Automotive News’ Top 100 List of Used Car Dealer Groups.
That’s incredible considering Carvana wasn’t on the 2017 list at all. In a single year, they’ve more than doubled the number of retailed vehicles to 94,108 units. Compare that to long-time dealer groups like the number 4, Lithia Motors, who sold just over 151,000 used cars in the same period and Group 1 Automotive with shy of 148,000.
According to Carvana CEO Ernie Garcia, this is just the beginning for the online retail car seller. He predicts they could hit 2 million sold vehicles by 2021.
He foresees growth as customers begin to understand and embrace buying vehicles online. Garcia says that most customers “still don’t even know exactly what is meant when you say you ‘buy a car online.’ ”
Carvana’s growth expectations put pressure on other used car dealers, particularly in acquiring vehicles to sell. Their current pre-owned inventory is more than 15,000 vehicles strong and will need to expand exponentially to reach their growth targets. The company has operated at a loss since their 2017 start while they continue to gain momentum, surmising that the long-term goal is to make money through volume sales.
More than ever, it’s critical for dealers to understand the used car market trends to acquire inventory intelligently. With aggressive competition and an unpredictable market, knowing where to turn for the right tools and products to source used vehicles from private sellers can make all the difference.
Vehicle Acquisition Network is committed to providing the best communication tools and methods available to assist dealers in acquiring pre-owned inventory direct from private sellers and be MORE PROFITABLE over the long term.
The Learning Center was set up to offer dealers a free resource for learning how to be successful at consumer vehicle acquisition. From how to find the right cars to initiating the process, appraising vehicles, negotiating, and ultimately transacting with private sellers, the VAN Learning Center features a variety of free material to aide you in the process.
V.A.N. saves you time and money by automatically searching online listings to locate your most sought-after units from private sellers in your area. Find the pre-owned vehicles you want faster than your competitors for hundreds less than you would pay at auction.