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Strong New Cars Sales Help Used Car Sales in 2013

Used Car Supply Will Be Strong and Prices Lower in 2013


Strong New Cars Sales Help Used Car Sales in 2013

Pickups could help drive new and used vehicle sales in 2013 if the economy stays strong.

Photo (c) Getty Images

Edmunds.com is painting a rosy picture for new car sales in 2013, which means used car sales are going to be impacted as trade-ins continue to flood the marketplace, which is good news for used car buyers willing to wait until the first quarter of 2013.

In their "Auto Industry Trends for 2013" report, Edmunds.com chief economist Lacey Plache and respected senior analyst Michelle Krebs report on the trends that will affect the industry in 2013. There are some surprising tidbits of information that are going to shape the used car market.

In no particular order, they are:

  • "Trucks will finally see some renewed love in 2013, thanks to the all-new 2013 Ram 1500, 2014 Chevy Silverado 1500, and 2014 GMC Sierra and greater demand from new home construction and post-Sandy rebuilding." I actually see this placing price pressure in this segment as some buyers opt for newer used trucks when they discover that new trucks are out of their price range.
  • "More love is also in store for fuel-efficient vehicles, especially compact cars, subcompact cars, and hybrids. Despite fairly stable gas prices, consumers are finally ready to commit to these segments for longer than the length of a gas price spike. They are not willing to commit to all-electric vehicles, though, so automakers will increasingly focus their efforts on plug-in hybrids and hybrids." There's a real opportunity here for those interested in buying a used electric vehicle. I've been impressed by the few I've driven. Snatch one up if you don't have range anxiety.
  • "Growth in the new car market will benefit the used car market next year as well. The surge of off-lease vehicles and older trade-ins will boost used car inventories in a range of model years. As a result, prices will soften up to $200 to $300 less per vehicle, on average." Combine that with savings on used car financing that I explain in another article and you're looking at saving upwards of $750 or more on your next used car.
  • Plache predicts up to 500,000 vehicles will be coming off lease in 2013, which is going to help the new car market, obviously, but will have a huge effect on the certified pre-owned market. That's also going to help soften pricing in that used car segment as buyers have more choice in used cars that are less than four years old.
  • "Unfortunately, uncertainty is likely to persist in the U.S. in 2013 as the government continues to tackle its budget issues, leaving consumers and businesses with unresolved questions about their future financial situations." This is the big unanswered question in new and used car sales going ahead. A weaker economy means people who absolutely need replacement vehicles might head into the used segment instead of the new vehicle marketplace. That could mean the above-mentioned drop in used car prices evaporates and that further hurts vehicle buyers.

Here are some of my views about the used car marketplace as we head into 2013.

  • The first has to do with private sellers. They're going to have a smaller impact on the used car marketplace because professional sellers (i.e. independent and franchised dealers) are going to continue to want a supply of vehicles to sell and will aggressively pursue private sellers with attractive offers. Plus, it's tough for private sellers to compete with the sophisticated online selling tools that dealers possess.
  • Certified pre-owned is going to continue to be a hot commodity simply because franchised dealers make more money off certified pre-owned used cars than new ones. A strong certified pre-owned operation helps new car dealers have steadier streams of income that won't be as affected by the economy.
  • Used cars will be the next TV star. A friend in the industry is working on a pilot for a show about used car dealers. Sure, it sounds dull, but heck cake baking and truck driving caught on. Why not used cars? Just as long as it's not "Carfellas," which had an appropriately short life on Discover I will be happy. (Seriously one of the worst shows I ever witnessed.)

Of course, all of these predictions could go out the window. As James Carville used to tell candidate Bill Clinton, "It's the economy stupid." Something goes wrong there and all bets are off with these predictions for the used car industry in 2012.

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