NEW YORK -- Tight supplies of used vehicles will keep auction volumes low and used-vehicle prices high, but used-vehicle sales are starting to recover, says the chief economist for the nation's largest auto auction association.
Ira Silver of the National Auto Auction Association said auction volume will dip again this year to about 8.6 million vehicles, compared with 8.9 million in 2009. Silver said he expects used-vehicle retail sales at dealerships to reach 37 million in 2010 and 39 million in 2011, up from 35.5 million in 2009.
The used-vehicle market faces "not a demand problem but a supply problem," Silver said last week during a panel discussion by economists at the association's annual conference.
Used-vehicle supplies are low in part because of weak new-vehicle sales. Those sales dropped by about 2.9 million from 2007 to 2008 and an additional 2.8 million from 2008 to 2009, resulting in fewer car and truck trade-ins.
Tom Webb, Manheim's chief economist, said dealers have done well with their used-car business, having become leaner and more efficient. Overall dealership employee productivity is higher. Webb predicted that used-vehicle sales will get back to peak levels quicker than new-vehicle sales.
He said dealers wholesale more than 9 million used vehicles a year, about half of which are sold at auto auctions. Webb said he thinks dealers will send more of their used vehicles to auction as new-vehicle sales pick up and they take more vehicles as trade-ins.
Also, Webb said, the volume of dealer-owned vehicles consigned to auctions typically increases when commercial consignment volume -- meaning used vehicles sold by rental and other fleets -- drops.
"When there are fewer off-lease units, it doesn't mean that cars aren't coming back. It means they're coming back as trade-ins," Webb said.
On the new-vehicle side, he cited several statistics to show that underlying demand in the U.S. market will support sales of about 15 million a year, not the 16 million to 17 million where the market peaked.