As a rising number of vehicles come off lease, some industry experts have been trying to decipher how to cope with a flood of used vehicles. How would dealerships handle them all?
Sell them, of course.
Used-vehicle financing made up 55.6 percent of the auto finance market in the second quarter, compared with 54.3 percent a year earlier, according to Experian, though used-vehicle prices haven’t fallen as they were expected to.
Customers are savvy about finding the best bang for their buck. Prime borrowers, in particular, are buying more used cars. With plenty of 3-year-old used and CPO models on dealerships’ lots, it’s no wonder they take advantage of prices below what they’d pay for a new vehicle.
Because of prime borrowers’ expanded role in the used-vehicle market, the average credit scores for used-vehicle buyers has improved. In the second quarter, the average used buyer’s score was 674 for franchised dealerships, up from 671 a year earlier.
New-vehicle buyers’ credit scores, on the other hand, are falling. The average was 710 in the second quarter, down from 711 a year earlier.
Many predicted that used-vehicle prices would fall this year. But that hasn’t been the case so far. Jonathan Banks, executive analyst at NADA Used Car Guide, told Automotive News last month he was surprised at the “resilience” of the used-vehicle market. He said stronger marketing strategies, such as in the certified pre-owned segment, have helped.
The industry is managing the influx of used vehicles with CPO programs and even used leasing for some lenders, giving consumers a reliable car at a lower cost.