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Trends in the Used Car Market: A Look at 2015 and Beyond

Explore the growth and challenges faced by the used car market in 2015, including the rise of independent dealers and the importance of customer satisfaction. Discover advertising and new media strategies for dealers to attract customers and boost sales.

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Trends in the Used Car Market: A Look at 2015 and Beyond

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  1. A New Day for Used Cars • New light-vehicle sales may receive most of the headlines, but the used-car market enjoyed an equally great 2015 with a 5.6% increase, or 38.3 million vehicles sold. • The average used-vehicle price of $18,600 was a 4.6% increase and a new record. With an increasing number of returned leased vehicles, the average age of a sold used car during 2015 decreased to 4.4 years. Plus, 54% were 3 years old or newer. • Primarily because of lower gas prices, the average transaction price of a pickup truck increased 9.9% and a non-luxury SUV/CUV 5.6%, compared to just a 0.1% increase for non-luxury cars.

  2. Independent Dealers’ Dilemmas • There are 40,000 independent used car dealerships and 18,000 franchise dealerships, but independents have difficulty remaining competitive. In a recent survey, 52% stated that “inventory acquisition” and “capital to finance inventory” were their top challenges. • During 2015, independents sold 12% more vehicles 6 years or older, but also sold 12% fewer vehicles 5 years or newer. Franchise dealers obtained a much larger share of newer used vehicles because of their exclusive access to closed auctions. • Independents that invested in customer relationship marketing (CRM) software increased the average vehicle profit $261, sold an average of 14 more vehicles per month and reduced the average car turn from the 60-day industry average to 19 days.

  3. Certified Pre-Owned Buyers 2015 Profile Comparison

  4. Less Sales Time = More and Happier Customers • According to the 2015 Cox Automotive Time Study, the average time for the sales process, including price negotiation, was 53 minutes; an appraisal was 43 minutes; and the F&I (finance and insurance) session was 61 minutes. • At a total of 157 minutes, the entire car buying process was 1.75 times longer than what an Autotrader study found to be optimum. Customer satisfaction starts to erode significantly after 90 minutes and declines to less than average satisfaction at 2.5 hours. • The Online Retail Finance & Insurance Study from MakeMyDeal found that 84% of consumers think F&I products have real value, but 71% would prefer to research F&I at home. When they do, 63% said they are more likely to purchase F&I products.

  5. Prepared to Buy • The Autotrader/Kelley Blue Book study also revealed that used car buyers spent more time, 15 hours and 22 minutes, to acquire a vehicle than new car buyers, at 13 hours and 1 minute, and with 60% of used buyers’ time for online research and shopping. • Of all used car buyers participating in the study, 29% knew the exact vehicle they wanted to buy, compared to 34% for new car buyers. • Used car buyers are more likely to shop third-party Websites, at 80%, compared to 57% at dealership Websites and 29% at OEM Websites.

  6. Tracking the Trends • According to a May 2015 study by Ipsos for CarMax, 49% of surveyed adults said they would purchase a used car if safety technology upgrades, such as collision avoidance, were offered at a reasonable price. • In the same survey, 23% said that their “greatest wish” for a future used car would be one that is self-cleaning, 21% would wish for one that helped to keep them calm and focused and 11% that complements their driving. • RVI Group’s analysis of the used car market in its December 2015 Risk Outlook report concluded that used vehicle prices will decline every year during the period 2016–2020: 2016, -0.9%; 2017, -3.2%; 2018, -4.9%; 2019, -6.7%; and 2020, -7.9%.

  7. Advertising Strategies • With a large percentage of high-income individuals buying used cars, dealers may want to promote a “luxury” incentive, such as a gift card to an upscale retailer or a coupon for a fine bottle of wine from a local wine shop. • Since many consumers are buying new trucks, SUVs and CUVs because of low gasoline prices, used car dealers can promote their inventory of these vehicles with a matching incentive: a gasoline card or an online coupon to purchase accessories. • Dealers in areas with large Latino American populations can incentivize purchases with a special offer for a family outing at a local entertainment venue since Latino Americans like to participate in activities as an extended family of multiple generations.

  8. New Media Strategies • Ask customers to share their used-car stories: What they wanted in a used car, how the dealer fulfilled their need, the dependability and fuel efficiency of the vehicle since it was purchased and photos and videos of road trips. • Used-car dealers, who support, promote and participate in a local charity or community activity and use their social media platforms to generate interest among customers and the public, gain significant credibility and elevate their image and brand. • Have the sales team create and upload videos of each other, introducing themselves and explaining how they help customers find the right vehicle for their needs and a choice of affordable interest rates and monthly payments.

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