As the auto industry transitions to 2019 models, used-vehicle inventory is incentivized to make way for new stock. But used-vehicle demand could outpace available inventory, Jonathan Banks, vice president of vehicle valuations and analytics at J.D. Power, told Auto Finance News.
The goal is to have a “smooth transition” into the new year where the 2018 model goes away, and the 2019 models come in to boost new-vehicle sales, Banks said. “Ideally, the 2019 model should sell slightly higher than the 2018 model did at the same time last year because incentives naturally go up on a vehicle.”
The hope is that 2019 models have been incentivized enough for consumers to want to buy it so that it’s just slightly more expensive than last year’s used model. However, OEMs with inventory issues are carrying the 2018 models “longer than they should,” Banks said.
From there it becomes a vicious cycle where the OEM needs to put more incentives on new vehicles to bring the price closer in-line with last year’s model. “Consumers will wonder why they should buy a new car when they can get a 2018 model,” he said.
The disconnect is a big factor that J.D. Power monitors, especially as OEMs are revealing 2019 models as the year heads toward its close.
“If 2018 models are everywhere then consumers will want those and that causes a huge problem.” Banks advises that OEMs need to manage that slow down to make a good transition into the new year.
