Used Cars Remain Key Contributor to Profitability as Auto Dealers Face Challenges in Economy

ATLANTA – Although higher gas prices, tighter credit, falling house prices, and strategic shifts by manufacturers resulted in lower new and used vehicle sales in 2007, used vehicle retailing remained profitable for both independent and franchised dealers.

Examining trends within the remarketing industry and the economy as a whole, the 2008 Used Car Market Report (UCMR) — written by the team of analysts at Manheim Consulting — documents trends with the use of both proprietary and industry data from 44 research sources.

In this 13th annual edition of the UCMR, Manheim Consulting highlights activity among dealers and institutional sellers (including fleet, leasing, rental, and finance companies) and takes expanded looks at trends in reconditioning and international remarketing. The book also details developments in “intelligent remarketing,” discussing the interplay between physical and online auctions and the ways in which technology and data analysis help buyers and sellers make smarter decisions.

Some of the key facts from the 2008 Used Car Market Report, according to www.theautochannel.com, include:

North American auctions remarketed 9.6 million used vehicles in 2007, with dealer-consigned vehicles rising in actual numbers and as a percent of auction volume. Wholesale pricing rose for most of the year before falling in the fourth quarter.

Overall, retail used-vehicle sales volume fell for the second straight year, though average price ($8,186) reached its highest level since 2004. For franchised dealers, the gap between their net profit per new vehicle sold and per used vehicle sold was the largest ever recorded by NADA, at $257 per vehicle in favor of used vehicles.

New lease originations increased for the fourth consecutive year, to 2.8 million units. Off-lease volumes rose by 145,000 units. Wholesale pricing for off-lease units at auction remained strong.

New vehicle sales into rental declined by eight percent to 1.9 million units. The average price of program cars at auction jumped substantially due to lower volume and a richer mix of models.

New vehicle sales into nonrental fleets increased for the fourth straight year, with foreign brands and fuel-efficient models increasing in popularity. Online remarketing to drivers/employees continued to grow.