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CNW Research Updates November Used Car Research

Finds Emotional Buyers Returning to Used Car Marketplace


CNW Research Updates November Used Car Research

A 2006 Rolls-Royce might be considered an emotional purchase.

(c) Rolls-Royce Motor Cars Houston

CNW Research of Oregon, run by Art Spinella, continues to be a great source of information for the used car industry with some great research. Probably the most interesting tidbit this month is the fact that more emotional buyers are returning to the marketplace.

What is an emotional buyer? It's somebody in the used car marketplace that buys a vehicle for passionate and not practical reasons. They see a car and zero in on it. No other used car exists for them.

As Spinella reports, CNW has found, "the emotional buyer - someone who purchases a used vehicle because they've "always wanted one" of a particular make and model - is returning. During the depths of the recession, fewer than 3% of used-car buyers fit into this category. The most recent data show more than seven percent of used-car shoppers are looking for that "special" vehicle."

That bit of data indicates that people are buying used cars not because they need them but because they want them. That's why that segment of the market is affected by economic downturns. When the money is tight, you buy a used car because you need it. Not because you want it. (Well, at least the fiscally responsible among us act that way.)

CNW Research also points out "the share of used-car buyers who say they are replacing a vehicle that is no longer reliable is increasing." This is also considered a fragile segment of the used car marketplace because it indicates buyers who are replacing a used car before it breaks down. This is preventive buying and not reactionary spending.

There are other tidbits from the monthly CNW research report. This isn't a new car site, obviously, but the relatively good health of the new car marketplace is having an impact on the used car lots. CNW points out, "dealers are offering some pretty good prices across the country for solid used vehicles as trade ins to meet the demand."

A surprising piece of information from the report is how strong November sales are turning out to be for used vehicles. The report says used-vehicle sales are on track to a best 3 million units, up 17.6 percent vs. a year ago with franchised dealers up 39 percent and independent dealers climbing 41 percent. Taking it on the chin: Private Party sales, off 23 percent.

It's the private seller who is having difficulty in this market because of the strength of professional dealers. That wasn't the case even just a few short months ago when private sellers were on par with franchised dealers and ahead of independent dealers. The report points out, "Casual sales are suffering because dealers are becoming increasingly aggressive in selling used cars and are having vehicles shipped into the Northeast from as far away as California to meet the demand."

Superstorm Sandy, which struck at the end of October, had its impact on used car sales but it wasn't a lasting one. According to the CNW report, "Sandy pulled about a quarter million used sales out of the market in October, but many of those postponers came roaring back in November." That could help explain the strong sales figures for November.

Second, many individuals who would sell their cars privately in the Northeast simply lost those cars to Storm Sandy and have nothing to sell or had other issues to contend with. That's going to have some impact on new car dealers and used car dealers because there will be nothing to trade in. It's not going to be at the same level of Cash for Clunkers but it will have some impact.

I've written about it before but buyers who have lost vehicles because of storm damage need to be vigilant. Flood victims need to be leery of unscrupulous sellers who might take advantage of you because you are distracted and anxious to get behind the wheel of anything.

Let's leave on this prediction of how things will play out for the next two years. Spinella says, "Thanks to Storm Sandy and the resulting used-car inventory losses, prices for pre-owned vehicles have jumped more than 3.2 percent compared to a year ago for Franchised dealers and nearly 3.5 percent for Independent dealers. Most encouraging, the share of asking price that Franchised dealers have been able to get is 94 percent, a solid percentage gain over October, even though still a bit behind year ago. Independent dealers were able to get nearly 93.5 percent of asking price, a marked improvement over the previous six months."

He added, "As we've pointed out in the past, the used-car sales outlet for 2013 is again above 40 million units with 2014 hitting the 40.25 million unit mark. In the short term - next two years - we're also expecting share of total used to swing back toward private party with franchised dealers losing ground and independents remaining flat. Private Party sales continue to become easier because of a growing willingness to use outlets such as craigslist.com and promotional activities on the part of sites such as eBay Motors, AutoTrader and others. "

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