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The used vehicle market should grow about 1% in 2018 bolstered by a federal tax cut and influx of utility vehicles, while new vehicle sales are expected to remain flat, according to Cox Automotive's senior economist.

Used vehicle sales should reach 39.5 million units — a 400,000-unit increase from the expected 39.1 million used vehicles that will sell in 2017. About 16.7 million new vehicles are expected to sell in 2018, according to Charlie Chesbrough of Cox.

The used vehicle market has been following the new vehicle market and seeing a shift in the flow of vehicles toward more compact SUVs.

"First, the mix of off-lease cars is improving and falling more in line with consumer demand," said Chesbrough. "The large amount of off-lease vehicles in 2018 and beyond will include more SUV/CUV-type vehicles, which have been in such great demand. That will help."

Chesbrough and other experts agree that the tax cut signed by President Donald Trump on Dec. 22 should bring new buyers to the used vehicle market. The bill doubles the standard deduction and gives workers more take-home pay, which could be used to finance new leases or purchases.

"The doubling of the standard deduction will lift the spending power of most vehicle buyers, and used vehicle sales will benefit the most," Chesbrough said. "The average household income of a buyer in the used market is $70,000 vs. $100,000 in the new market. While the nominal tax savings will be largest among high income Americans, vehicle affordability will improve the most and across the broadest base for lower income brackets. The expected impact on the used market will be to improve both quantity and quality."

While the new-vehicle sales market is expected to be flat in 2018, used-vehicle sales should propel a growth trend that began two years ago among fleet remarketers, said Chris Clarke, ARI's North American remarketing manager.

"We have been experiencing organic growth over the last two years in vehicle remarketing, and we expect to see that trend continue in 2018," Clarke said. "We are also seeing a shift by certain clients as well the broader market to a higher adoption rate of small SUVs in fleets and in the overall retail markets. With a continued diminishment of the popularity in many of the sedans over the last couple of years, it is expected that we continue to see increasing volumes in remarketing trending towards SUV vs. sedans."

Some auctions are seeing the number of dealer vehicles fall and commercial vehicles rise. That trend should continue in 2018, said Penny Wanna, vice president of ServNet Auctions.

"In 2017 the type of vehicles (dealer and commercial) consigned at auction has been trending with dealer vehicle count down while the commercial vehicle count is up – the up/down shifts are almost equal in count, not effecting overall sales yet the formula on how we get to our total sales is different than in years past," Wanna said. "We are forecasting this trend to continue into 2018."

Used vehicle values increased about 2% from August to October as a result of the vehicles purchased to replace more than 500,000 vehicles damaged or destroyed by hurricanes in Texas and Florida.

Originally posted on Automotive Fleet

About the author
Paul Clinton

Paul Clinton

Former Senior Web Editor

Paul Clinton covered an array of fleet and automotive topics for Automotive Fleet, Government Fleet, Mobile Electronics, Police Magazine, and other Bobit Business Media publications.

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