Outrageous New Car Prices Fueling Robust Used-Vehicle Market

As new-vehicle prices rise, more consumers continue to shift to the used-vehicle market, according to a Cox Automotive study.

In another finding, the study said new- and used-vehicle customers who handle at least part of the process online are more satisfied with their overall dealership experience.

Last year, nearly two in three car buyers shopped primarily in the used-vehicle market amid inflating new-vehicle payments, according to Cox Automotive's 2019 Car Buyer Journey study.

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MDarringer - 4/18/2019 10:12:17 AM

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With all the cheap leases several things are true.

1. A dealer can pick the best of the best on the lease returns to put out as CPO which improves customer satisfaction.

2. There is a glut of cars at auction so you can buy well. There is money in being a non-dealer lot and buying cheapies at auction and slightly underpricing CPO.

PUGPROUD - 4/18/2019 10:40:42 AM

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No expert but believe more cars are sold on the basis of a customer's monthly
$ nut than anything else. As new car prices go up and up (and they are) more people will buy low mileage off lease used cars. Its that simple.

MDarringer - 4/18/2019 10:57:03 AM

+1 Boost

What people haven't caught onto is that prices of used cars have gone up too. Part of that price inflation is due to the CarMax effect where they pretend that price gouging is generous consumerism. CarMax is notorious for buying ultra cheapies at auction and putting them out as pristine used cars.

skytop - 4/18/2019 1:04:32 PM

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Used car dealers frequently make more profit on the financing that on the sale of the vehicle.
Many buyers are ignorant of excessive finance charges and are only interested in what the monthly car payment will be.

mini22 - 4/18/2019 9:30:57 PM

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There is usually 4 times the profit in used cars than new cars.

MDarringer - 4/18/2019 10:02:30 PM

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That's a misleading statement because it does not specify parameters nor it is universally true as the phrasing implies. I'd love to know where you got the factoid.

Is it actual dollars of profit on a given used car versus a similar new one?
Is it % difference in invoice/cost vs sales price?

I can tell you that in actual dollars we are not getting 4X the profit on a CPO vs a new car. That also is not true of the seemingly "non-affiliated" used car lots our group runs.

I will add parenthetically that when our group buys a dealer we try to keep the same name if the reputation is good or if not we change it to Yugo of Beverly Hills (i.e. the brand and whatever city it's in).

Many times you can sell a new car at invoice and make a profit because there is incentivization to the dealer on each example of say the Family Truckster sold in a given time frame.

If you sell a used car at invoice (what you have put out monetarily) you certainly do not make a profit.

So what's your source? What are the parameters?