Wednesday, Sep 17, 2014
Local News

Recession changed used car sale business


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SEBRING - The Great Recession changed many things, including the used car business - for both sellers and buyers.

As supply fell, prices went up. Buyers, spooked by the economic uncertainty or their own change in income or credit history, hung on to their older cars.

New-car sales and leases also dropped dramatically between 2008 and 2010, meaning some of these cars that would have become trade-ins on dealer lots, were no longer available.

"Another factor is a change by the three Detroit U.S. auto makers. To keep factories humming, they once leased tens of thousands of new cars to rental car fleets and then moved them onto dealer lots as used models after a few months," a Wall Street Journal report states.

"There are fewer of those vehicles because manufacturers cut excess production capacity in recent years. Cash-for-clunkers rebates also took many older vehicles off the road," the report adds.

As we head into the second half of 2013, the supply of used cars may improve as people trade in their older cars for newer models, drawn by attractive interest rates and other incentives.

Banks have also loosened up lending requirements, some say.

Edmunds.com, in fact, expects the auto industry to post "its highest annual sales performance in 2014 since shoppers bought 16.5 million new cars in 2006."

While a big jump in car leasing propelled strong sales of new cars this year, "a continued release of pent-up demand will lead the way to 16.4 million new car sales in 2014. The average age of all light vehicles on the road climbed to 11.4 years in 2013, and an aging fleet will continue to force buyers back to the market next year," edmunds.com adds.

Some local car dealerships are already becoming to see some of that.

Don Elwell, Alan Jay Automotive's director of marketing & public relations, said supply has loosened up a bit although demand for preowned cars, especially for some models, still remains strong.

Allstar Car Sales' Co-owner and Vice President Russ Albritton IIII said while he has faced no problem stocking his car lot, good trucks with low mileage are especially hard to find, and, consequently, have "trended up in prices."

Dan McPhail, owner/manager of McPhail's Auto Sales, also has found it hard to get low-mileage used trucks and said anyone looking to get a good used car has to start off by looking at the $10,000 to $15,000 price range.

"Five-thousand is the new 2,500," he said. At one point, he explained, drivers could buy a decent starter car for $2,5000. Now, that threshold has climbed to $5,000.

Some car shoppers don't just look at the sticker price when weighing options.

Zero-percent financing and very low interest rates have made monthly payments for some new cars almost the same as their older counterparts.

Given a choice between a new and used car, Kathy Wilds said she goes for new if she is taking out a loan.

"Prices are close," she wrote on Highlands Today's Facebook page. If she needs to take out a loan, "might as well buy new," she said.

While some people might prefer that, Albritton said everyone who buys a new car should remember that it depreciates 30 percent in value the moment it is driven off a lot.

"Everyone drives a used car," he said, suggesting a low-mileage counterpart is not only cheaper but could even come with factory warranty.

Overall, used car sales are down 3.4 percent through the first half of 2013, reports Edmunds.com.

Average used car prices at franchise dealerships are also down $118 in the first half of 2013 to $15,986, it adds.

In its 2013 Q2 Used Car Market Quarterly Report, it states that 18,995,521 used cars were sold in the U.S. through the first six months of the year, down from 19,666,671 used cars sold during the same period in 2012.

Used car sales by franchise dealerships, however, are up 6 percent and certified pre-owned sales are up 12.5 percent in the first half of 2013, the report adds.

"These trends suggest that the used car market continues to be driven by lease returns and vehicle trade-ins," says Edmunds.com Director of Used Car Analysis Joe Spina. "And with franchise sales up 20 percent from the first quarter to the second quarter, it appears that franchise dealers' used car sales are gaining momentum as the year progresses."

How they factors eventually play out remains to be seen, but for car dealers like Albritton, the more immediate concerns -- like a prolonged government shutdown - weigh more.

October sales have been slightly lower, Albritton said, attributing it to the shutdown.

"The uncertainty has put some people in a tizzy," he added.

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