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October 2013 Used Car Sales Analysis

Industry Analyst Points Out Trends in Used Car Marketplace


October 2013 Used Car Sales Analysis
Photo © Austin/Getty Images

CNW Market Research, an expert in the analysis of the used car marketplace, is showing strong sales for October 2013 in the used car marketplace but there are some warning signs that can't be ignored that could hurt those in the market for a used car.

Used Car Sales for October 2013

According to CNW Market Research,franchised dealer sales continued to lead the way in October 2013 with sales estimated at 1.18 million, which is .4% ahead of October 2012. Independent dealer sales were pegged at 1.05 million, which is a substantive 7.7% drop from October 2012. Casual (or private) sales, which are transactions between consumers were at almost 843,000. That's an 18.2% spike over the same time last year.

Year to date, franchised dealer sales are at 13.19 million, an increase of 3.5%. Independent dealer used car sales are at 11.78 million, an increase of 0.6%, and private party sales are at 10.48 million, a 6.2% improvement. So far in 2013, 35.54 million used cars have been sold.

Used Retail Prices Up Over October 2012

Retail used car prices actually surpassed October 2012 – a virtual first for calendar year 2013, which has seen used car prices falling. That doesn't bode well for those who delayed getting into the used car marketplace.

According to CNW, while franchised dealers (dealers who also sell new cars) were asking about a half-percent more than a year ago, they were able to squeeze out a 2.6% gain in transaction prices (excluding taxes, fees, aftermarket products, etc.). For independent dealers, (those dealers who don't also sell new cars), the year-over year gain was a comfortable 7.2 percent or about twice the increase seen in asking prices.

(Questions to ask a used car dealer will help you if you are considering buying a used car at a dealership. Questions to ask a private seller will help if you're buying from another consumer.)

The month-to-month differences still reflected downward pressure, but that’s not unexpected as the hotter summer season ends and back- to-school volume shrinks. The government slowdown, however, was primarily responsible for the increase in used-vehicle days’ supply climbing to nearly 47 days as some business-to-business and government employee sales were lost, according to the analysts at CNW.

Franchised dealers had an average asking price of $11,482 in October 2013. Independent dealers had an average asking price of $10,223. Interestingly, both were in the same ballpark when it came to final transaction price with the franchised dealers getting 94.28% of asking price while independent dealers fared slightly better at 94.56%.

Certified Pre-Owned Used Cars

Certified Pre-Owned (CPO) used cars continue to be the most desired used vehicles in the market. Sales have grown dramatically, according to CNW research.

Dealers, and manufacturers ridding their books of off-lease models, have found CPO used cars (click here for an explanation of certified pre-owned used cars) move off of lots significantly faster than the same vehicles that are not certified. While non-CPOs take an average of 40 days to sell – about four days faster than the industry average for all used vehicles – CPOs take slightly less than three weeks.

That's a huge bonus for used car dealers who need to turn cars quickly before paying higher interest rates on their financing. Selling a certified pre-owned used car 19 days faster means more money in the dealer's pocket.

Add to the faster turnover the premium people are willing to pay for a CPO model, CNW points out, and the extra expense of putting a car through the inspection process is well worth the cost. In September, the average CPO premium over non-CPO was $2,816 and the early October figure is nearly $2,900. The typical 160-point inspections most certified pre-owned vehicles require costs nowhere near that much money.

Used Car Leasing Increases

In September, nearly 107,000 used vehicles were leased rather than financed or bought for cash, according to CNW. That’s a 4.5% increase over a year ago marking the largest year-over-year gain of 2013 and the best unit volume since June 2009. The typical used-car lease is in the near-luxury and luxury segments including high-end SUVs with the Cap Cost steadily in the $40,000 to $41,000 range this year.

Used car leasing is different that new car leasing because consumers probably don't have the same loyalty to a particular line once the lease is up. Also, dealers need to be more precise in their residual value estimations than new car sellers because there is little wiggle room when it comes to profit.

The market is still relatively small with more than 38 million used cars usually changing hands. However, it could quickly become a profitable area of the business for dealers who might want to take vehicles that can't certify and turn them into lease vehicles instead.


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