Used vehicle sales are on the rise as the price of new vehicles continues to rise.
Car dealers are growing increasingly concerned about vehicle affordability, according to a new report from the National Automobile Dealers Association’s monthly sales report.
“All in all, the year ended strong with 17.1 million units,” said NADA chief economist Patrick Manzi. “In December 2019, we saw a continuation of many of the trends we have seen throughout the year.”
However, going into 2020, NADA anticipates new-vehicle sales of 16.8 million units – a 1 to 2% decrease from 2019, he said.
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The combination of affordability concerns and high used-vehicle inventories means the used vehicle market continues to pull customers away from the new-vehicle market.
It’s not just the winter chill cooling down new vehicle sales as steadily rising prices are pushing many toward used cars.
In 2020, NADA anticipates the used-vehicle sales of 39.5 million units – a flat market compared to 2019.
“Consumers are feeling confident in the economy. Interest rates are low. Unemployment is low,” said Manzi. “In the U.S. economy, things look really good and I’m confident we will have another solid year in 2020.
“As affordability remains a challenge, more consumers chose used vehicles in 2019. New cars are getting too expensive for many consumers. Even consumers with great credit or the ability to buy new are instead choosing a used vehicle.”
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New data from Edmunds, the car shopping site, found that the average transaction price for a new car reached $38,377 in December, up more than $1,000 than the $37,260 at the end of December 2018, and substantially more than the $33,773 in December 2014.
The monthly payment, according to Edmunds, has climbed right along with the ATPs and was $577 in December 2019, compared to $558 per month in December 2018 when the interest rates were higher and $494 per month in December 2014 when interest rates were a full point lower.
The average new vehicle payment continues to rise, pushing to $577 per month in December, up from $558 in December 2018.
The term of auto loans also have gotten a bit longer averaging 69 months in December and 68.4 months in December 2018, and 66.8 months in December, 2014.
NADA also said December 2019 trends include efforts by OEMs to bolster sales with elevated incentive spending, a continued shift to crossovers and pickups and an increase in consumers choosing used vehicles or leased vehicles in light of affordability concerns.
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In 2019, light trucks continued to siphon off market share from the car segment. As of December 2019, light trucks represented 72.1% of all new light-vehicle sales – an increase of 2.9 percentage points compared to 2018. By the end of 2020, NADA expects the light truck segment to gain market share – topping 75%, compared to an anticipated car segment market share of 25 percent.