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Used Car Sales Hit Highest Mark in Five Years

This Will Be Best Year for Used Car Sales Since 2007

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Used Car Sales Hit Highest Mark in Five Years
Photo © Austin/Getty Images

This will be the best year for used car sales since 2007, according to CNW Market Research and that bodes well for used car buyers going into 2013 with lots of supply and softening prices.

Used car sales are expected to crest 40 million for the first time since 2007, right before the recession came roaring into our lives and dampened car-buying enthusiasm on a major scale. CNW Market Research (probably my prime source of information on the used car business) says the final numbers for 2012 should be 40,525,865. That includes franchised dealer sales, independent dealer sales, and private sales.

Here is the year-by-year breakdown of used car sales going back to 2002, according to CNW information. Even with 4.4% growth over 2011, the industry is still looking to get back to at least 2006 levels of more than 42.5 million.

  • 2012: 40,525,865 (est.)
  • 2011: 38,792,169
  • 2010: 36,883,987
  • 2009: 35,491,762
  • 2008: 36,530,404
  • 2007: 41,418,561
  • 2006: 42,565,544
  • 2005: 44,278,402
  • 2004: 42,706,103
  • 2003: 45,279,140
  • 2002: 43,025,087

For franchised dealers, 2012, CNW said, "was a very good year with sales up more than 8 percent while independents only had a modest increase of less than 2 percent." Franchised dealers are those associated with a manufacturer such as Ford. Independent dealers include places from CarMax all the way to Buy-Here, Pay-Here dealers.

From my experience, independent dealers are hurting because franchised dealers have become so competitive in the used car marketplace. They keep the cars they trade in that are suitable for certified pre-owned programs and they also benefit from manufacturer specific auctions for dealerships that further siphon off the used car supply. Plus, franchised dealers are better able to market their used car lots as an addendum to their new car advertising.

Even though private party sales have taken a hit lately, the channel was able to score a 3 percent gain for the year, riding to ore than 11.5 million units. Just like independent dealers, private party sales are affected by strong demand for product from franchised dealers.

Private sellers aren't going to do well in 2013, according to CNW. Its outlook for 2013 is to "expect private party (casual) sales to remain soft with franchised dealers grabbing a larger overall share over total used sales - perhaps as much as 40 percent, depending on the strength of the new-car market. Edmunds.com shares that same sentiment about strong new car sales helping used car sales as outlined in another article about predictions for 2013.

Private sellers are also at a technical disadvantage when it comes to selling their used cars. In the past it was possible to be competitive because everybody knew to advertise used cars in newspaper classifieds but now myriad websites exist with paid leads for completed sales from the dealerships. That means there are behind-the-scenes forces driving consumers towards one used car ad over the other. It's not a level-playing field any more.

As the year ends, the supply of used cars is at a healthy number for sellers, according to the report. It says, "A modest increase of 8 percent was recorded in used-car days' supply data in the first half of December vs. year ago - 49.13 vs. 45.39 days. Historically, 45 days was considered ideal, but when the industry went to that figure and below in mid-2011, the shortage of inventory tripped dealers severely. Today, 50 days is considered by many to be ideal for meeting both shopper expectations on availability of specific makes, models and colors. "

Days' supply was originally a new-car term and referred to how long a car would sit on a dealer's lot before it was sold. (Some new cars have 11-day supplies, which means they are almost selling as fast as they can be made.) Smart shoppers can tell via good CarFax reports how long a used car has been sitting on a dealer's lot. Smart dealers will make price concessions to move used cars that have been sitting on a lot for more than 60 days.

Another good sign for consumers was average transaction prices dropped to some of their lowest points all year at franchised and independent dealers. That downward trend is going to mean good things going into the first quarter of 2013. Supply is strong, prices are dropping, and dealers are still willing to make deals with transaction prices being about 95% of asking prices for franchised dealers and 93% for independent dealers.

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