Buyers set a record high in used car sales last year and experts said shoppers should be able to find some good deals as price increases have slowed, a trend Springfield dealers have noticed.
More than 39.2 million used cars were sold last year, about 1.6 percent higher than the previous year, according to a recently released study by Edmunds, an online automotive site.
“It is the eighth straight year that used car sales have increased,” said Jay Lawrence general manager of the Jeff Wyler Auto Mall. “We saw an increase last year in used cars of about 5 percent and we anticipate about the same this year.”
The report’s authors attributed the spike to several factors, including buyers in the South replacing vehicles after Hurricanes Harvey and Irma and more available inventory due to a glut of vehicles ending their first lease.
Staff at White’s Ford in Urbana and the Bill Marine Auto Center in Springfield didn’t return calls seeking comment.
A large number of relatively new vehicles with leases ending had lead to used car prices growing more slowly, said Ivan Drury, senior manager of industry analysis at Edmunds.
The report showed used vehicle prices rose 1.4 percent in 2016, compared to an average increase of about 3.6 percent between 2012 and 2016. Strong demand for light trucks and sport utility vehicles, which were in somewhat limited supply in recent years, helped drive the price growth the industry did see, he said. Demand for trucks and SUVs has been strong both in the new and used-vehicle markets.
The number of off-lease vehicles hitting the market now will mean buyers looking for a used car or truck will see a greater variety of vehicle models and technology than in recent years, he said. Shoppers looking for good deals on newer used vehicles should be able to find reasonable prices on two- to three-year-old sedans, since their residual values fell more than more popular trucks and SUVs, he said.
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“If you’ve come back from a six-year drought in the car market, people will be amazed at the plethora of vehicles available, both the types and the technology,” Drury said. “A lot of new cars that were bought six years ago, that was a recessionary time and it was a very different kind of vehicle being purchased then.”
In Springfield, Lawrence said about about 35 to 40 percent of every vehicle sold is leased. Many of those vehicles are now coming back into the used car market, he said. That also helps the dealership retain a good supply of available used vehicles.
“We have a kind of a built-in renewal process to keep those people coming back,” Lawrence said. “If you have an 84-month loan, you’re not going to come back for five or six years because that’s about when you get back to even on the car. We lease and get people back in two to thee years.”
The age of the average vehicle has been climbing for years nationally, Lawrence said. That’s also driving demand for both new and used cars as customers eventually need to replace their vehicles, he said.
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“The longer people are keeping them, the more they need cars, too,” Lawrence said
One challenge, Lawrence said, is educating buyers on how pricing for used cars has changed as shopping is increasingly conducted online. The Springfield dealership uses software that searches dealerships and used car lots within 200 miles to gather details on how competitors are pricing vehicles.
That allows the Wyler dealership to adjust its prices based on the information it gathers and offer more aggressive pricing. But it also means there’s little room to haggle once a customer visits the dealership.
“We don’t give the big old discounts anymore like people used to want to negotiate,” Lawrence said. “We have to educate the customer on how we’re doing it because if you see a car for $15,900, you think you should be able to buy it for $13,900. That’s not the case anymore. If it’s at $15,900, it’s priced that way because that’s a competitive price and we are going to try to stick as close as we can to it.”
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By the numbers
36.2M — Used car sales in 2014
37.3M — Used car sales in 2015
38.6M — Used car sales in 2016
39.2M — Used car sales in 2017
Source: Edmunds Used Car Report 2017