Not long ago, used vehicles were a risky, unpopular investment. A vehicle typically entered the “repair-replace-repeat” period of its life after only five or six years, making the used market a source of apprehension not just for customers, but also for lenders and dealers.
Today’s market, however, has changed dramatically and requires an updated approach. In a new white paper, “Lasting Longer: How Better Quality Is Affecting Used Vehicle Demand,” NADA Used Car Guide sheds light on the shifting used vehicle market and provides valuable insight to help lenders and dealers alike capitalize on this new opportunity.
To succeed in a changing used car space, dealers and lenders must first understand where the market stands.
Consumers are keeping their cars on the road longer than ever, with the average vehicle age calculated at 11.4 years. Furthermore, even as the vehicle life cycle extends, maintenance concerns per vehicle are decreasing across all major automakers. Combined with the financial pressures built up from the 2008 recession, this creates an ideal set of conditions for customers to enter the used vehicle space for the first time. And they are, in ever-increasing numbers.
As profit margins rise and vehicle depreciation values slow, dealers and lenders have never been better positioned to succeed in this expanding used vehicle market. For franchised dealers, a segment historically uninvolved with used cars, the opportunity is even greater — a new and strengthening source of revenue may be added to their dealership.
The time when used vehicles were a dangerous, risk-laden investment is long gone. Extensive industry research, drawn from over 1 million combined automotive and truck wholesale transactions per month, illustrates a thriving used market with enormous potential for success.
As explained in the white paper, improved vehicle quality is reshaping consumer habits in ways that will continue to have a material impact on lender, dealer and automaker business practices.
Though many are taking advantage of this perfect storm in the used vehicle market, still more have yet to realize the benefits. Well-informed automotive professionals will be the best equipped to take advantage of this evolving and exciting market.
