Limited Used-Car Volume Will Prop Up Recoveries Through 2015

Used cars will be in short supply for the next few years, pushing up auction values and mitigating lenders’ loss levels.

Used-car supply is on track to shrink through 2015, according to ALG. For 2010 through 2013, supply will likely decline about 4% per year. It’s on pace to drop 2% in 2014 and 9% in 2015. By 2016, supply should reverse course, shooting up 10%, according to ALG.

The dip stems from the steady contraction of the new-vehicle market, where volume has plunged 35% in the past three years. Vehicle registration data offers a glimpse at supply trends. In the fourth quarter of 2009, the drop in used-vehicle registrations exceeded the drop in new-vehicle registrations for the first time in two years, according to data provider Experian Automotive.

Sport-utility vehicles will be in particularly short supply, as consumers opt for smaller vehicles like compact cars and crossover-utility vehicles. In fact, in the next three years, SUV volume will fall off about 40%, according to ALG statistics.

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