Increasing availability of credit offered to car buyers and longer loan terms, spurred on by competition, are possible reasons for the recent shift from used to new vehicle sales, according to IHS Automotive.
An analysis of vehicle registration patterns by IHS shows that more than 3.2 million used vehicle owners returned to market to purchase a new vehicle during the first half of the year, and the percentage of used car owners now purchasing a new car is the highest it’s been in six years, according to Tom Libby, a solutions consultant in the Loyalty Practice at IHS.
“There are several possible drivers, one is the new vehicle industry extending credit, broadening the range of credit approval and broadening the length of loans. We’re now seeing more and more eight, nine year loans, which obviously is going to lower those monthly payments, “Libby told Auto Finance News. “Also there’s intense competition that goes along with it, in the new vehicle industry that’s offering more, and including at the low end of the market based on price, so I’d say both those are contributing to it.”
Of the 3.2 million used-to-new buyers, brand loyalty remains strong, with 30% having purchased the same brand as their used car or truck. New technologies, Libby said, could also play a role in that rising tide, with more efficient fuel economy and safety features offered in newer vehicles that are hitting the market.
“Now these vehicles are becoming so much more efficient, the four cylinder engines are much more efficient than they used to be, so they’re getting much better fuel economy,” Libby said. “So if an owner of a vehicle has medium fuel economy and really needs something that gets better fuel economy, the new vehicles are leaps ahead of existing vehicles. And if a customer is really focused on safety, then technology could play into it.”
