Used-car volume has started to contract, fresh ALG data shows.
Sales of used cars are expected to slow to 3.2 million units in June, down 4% year over year, TrueCar’s analytics subsidiary ALG predicted in a report published Wednesday. From a quarterly outlook, ALG analysts expect year-over-year used-car sales to drop 2.5% in the second quarter.
“When you have a big uptick in new-car sales like we experienced from 2010 to 2017, it has to work its way through the snake,” said Eric Lyman, ALG chief analyst. “As we reached the sales plateau and came down a bit in 2018 and into 2019, we’ll start to see that leveling off of used-car sales.”
Used-cars have typically been used as a lever used by dealers to boost profits. “Used-car sales have become a vital component of maintaining profitability,” Lyman said. As OEMs prepare for a slowdown, they have invested in certified preowned programs to maintain stronger used-car values, which translate to stronger new-car transaction prices, he said.
The slowdown in sales will hit the volume going through lenders’ portfolios, likely resulting in lower origination volume, Lyman said. “If you look holistically, everybody’s on the same page as to what they’re expecting,” he said, noting “we’ve seen a very deliberate attempt to get ahead of a potential downturn in sales.”
Meanwhile, ALG expects the industry to maintain its 17 million annual SAAR forecast this year. Despite the “bullish forecast,” Lyman said he expects June retail deliveries of new cars and light trucks to decrease 6.3% year over year to 1.2 million units.