The escalating trade disputes between the U.S. and Europe may have an adverse effect on the used car market, at least according to a U.S.-based auto exporter, West Coast Shipping.

Potential tariffs on U.S. exports could pose a danger to profits for U.S. auctions, the company noted.

These potential tariffs could pose a particularly large issue this year, given that a larger number of off-lease vehicles are expected to return to the U.S. market. These off-lease vehicles are sold at U.S.-based auctions to U.S.-based buyers, however, many are often sold by U.S. auctions to overseas buyers.

Overseas buyers, such as those in Europe, account for a large portion of buyers for off-lease used vehicles that return to the U.S. market, West Coast Shipping noted. In fact, in 2017, used car exports from the U.S. outnumbered imports four to one, according to data from PIERS.

This demand from overseas helps keep up with the oversupply of vehicles in the U.S. Without demand from outside countries, the U.S. market could become oversaturated, potentially hurting residual values, West Coast Shipping argues.

Leasing as a buying option continues to grow, which would keep the flow of off-lease vehicles returning to the used market after their terms expire also growing.

Related: Stage Set for New-Vehicle Sales Contraction: Edmunds

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