New-Vehicle Challenges Affect Used-Vehicle Market
Description: New-Vehicle Challenges Affect Used-Vehicle Market The new- and used-vehicle markets have always been joined at the hip, but the connection is particularly strong today, as the microchip shortage and new-vehicle inventory challenges have
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slide2. New-Vehicle Challenges Affect Used-Vehicle Market The new- and used-vehicle markets have always been joined at the hip, but the connection is particularly strong today, as the microchip shortage and new-vehicle inventory challenges have pushed many car buyers into the used-vehicle market.
According to the US Bureau of Labor Statistics, used-vehicle prices increased a substantial 10% during April 2021, which is the largest single-month increase since 1953. This sector alone was responsible for a third of the significant increase in overall inflation for April.
The combination of these factors led to the average listed price of a used vehicle ($22,568) at the beginning of May becoming the highest ever, as reported by Cox Automotive. This was a 5.7% increase just from the end of March.<br>
slide3. More Used-Vehicle Market Insights As more buyers chose a used vehicle for various reasons, inventory was directly affected (the law of supply-and-demand). According to Cox Automotive, the 2.23 million used vehicles available at the end of April were 18% less YOY.
Similarly, in the wholesale used-vehicle market, supply had declined to 18 days, compared to a typical supply of 23 days, according to Manheim’s Mid-May (2021) Market Report.
Manheim’s wholesale pricing data aligns with Cox Automotive’s retail pricing report. During the first 15 days of May, Manheim reported a 4.55% increase in wholesale prices, which boosted its Used Vehicle Value Index to 202.9, a record, and 48% more than May 2020.<br>
slide4. Certified-Pre-Owned Vehicles in Top Gear As new-car buyers couldn’t find their dream ride because of reduced inventory, many decided to search the certified-pre-owned (CPO) subsector, resulting in huge sales increases, with April 2021 sales increasing 104% compared to April 2020.
The 259,242 CPO units sold during April were 9% fewer than March’s 286,061, which was a record-breaker. March units sold increased 36.4% from February 2021 (which was actually less than February 2020) and an 80.4% YOY increase from March 2020.
More than one-third of CPO sales during April were Toyota, Honda and Chevrolet models. Add Ford and Nissan to the list and these five brands represented 44% of all CPO sales.<br>
slide5. At the New-Vehicle Dealership According to data from the National Automobile Dealers Association (NADA), new-vehicle dealerships sold 1.2 million fewer used vehicles during 2020, or 13.7 million compared to 14.9 million during 2019.
Trade-ins on new vehicles (41.6%) were the largest source of used vehicles for new-vehicle dealerships during 2020, followed by auction purchase (27.5%), trade-ins on used vehicles (23.7%), street purchases (6.8%) and other (0.4%).
The NADA’s March 2021 Average Dealership Profile tells a different story, as used-vehicle sales increased 31.9% YOY to $5.88 million at the average dealership, which was 34.8% of a dealership’s total sales and 28.8% of total gross sales.<br>
slide6. Who’s Planning to Buy Used Vehicles? According to The Media Audit’s 62-Market 2020 Aggregate Survey, two-thirds (67.4%) of adults planning to buy a used car, van, truck, SUV or crossover during the next 12 months were 18–44, with 22.1% 18–24 and 45.3% 25–44.
Of these adults 18–44, 37.6% were white-collar workers, 16.3% were clerical/sales workers, 11.7% were in professional/technical occupations, 9.7% were proprietors or managers and 9.3% were blue-collar workers.
Households with parents 18–44 and children at home of any age were more than half (51.8%) of these adults planning to buy a used vehicle. Adults 18–44 who were younger than 35, single and with no children were second at 29.2%.<br>
slide7. What Are Their Media Choices? Unsurprisingly, the Internet and TV were the top two media where adults 18–44 planning to buy a used vehicle spent most of their daily media minutes, or 23.1% and 21.4%, respectively. Radio was third at 16.4% and billboards over-indexed the most, by 23 points.
Comparing the percentages of adults 18–44 who are not exposed to major media is also insightful: weekday newspaper 64.2%, Sunday newspaper 62.9%, radio 25.1%, direct mail 16.3%, TV 9.5% and the Internet 3.5%.
These adults are also audio streamers, as 57.6% streamed YouTube Music during the past 7 days, followed by 48.9% Spotify, 33.7% Apple Music, 31.1% for both iTunes and Google Play Music, 30.9% Pandora and 30.3% Amazon Prime Music.<br>
slide8. Advertising Strategies With inventories limited, used-vehicle dealerships could promote a free dinner for two at a local restaurant that is reopening when consumers trade in a vehicle of a particular age, model or value.
Use the table at the top of page 3 of the Profiler to create some promotional incentives to attract customers, such as a $50 gift certificate at a local garden center or tickets/concession dollars to a movie theater when it reopens.
Promote a “Budding Entrepreneur Day” and offer a discount to anyone who has started a new business as the pandemic wanes. Take a photo and promote their new business on the dealership’s Website and social media pages.<br>
slide9. New Media Strategies Used- and new-vehicle dealerships can use social media to highlight their inventory of certified-pre-owned vehicles (CPOs) and promote them as an alternative to a higher-priced new vehicle and waiting for new-vehicle inventories to return to normal levels.
Used-vehicle dealerships can benefit significantly by asking recent customers to share their car-buying and customer service experience on social media, including relating how their purchase alleviating a transportation challenge.
Consider an onsite Treasure Hunt promotion. Provide a list of items to customers via a text message they must note while shopping onsite for a vehicle and offer a percentage point off the price of their vehicle for each item noted.<br>
According to the US Bureau of Labor Statistics, used-vehicle prices increased a substantial 10% during April 2021, which is the largest single-month increase since 1953. This sector alone was responsible for a third of the significant increase in overall inflation for April.
The combination of these factors led to the average listed price of a used vehicle ($22,568) at the beginning of May becoming the highest ever, as reported by Cox Automotive. This was a 5.7% increase just from the end of March.<br>
slide3. More Used-Vehicle Market Insights As more buyers chose a used vehicle for various reasons, inventory was directly affected (the law of supply-and-demand). According to Cox Automotive, the 2.23 million used vehicles available at the end of April were 18% less YOY.
Similarly, in the wholesale used-vehicle market, supply had declined to 18 days, compared to a typical supply of 23 days, according to Manheim’s Mid-May (2021) Market Report.
Manheim’s wholesale pricing data aligns with Cox Automotive’s retail pricing report. During the first 15 days of May, Manheim reported a 4.55% increase in wholesale prices, which boosted its Used Vehicle Value Index to 202.9, a record, and 48% more than May 2020.<br>
slide4. Certified-Pre-Owned Vehicles in Top Gear As new-car buyers couldn’t find their dream ride because of reduced inventory, many decided to search the certified-pre-owned (CPO) subsector, resulting in huge sales increases, with April 2021 sales increasing 104% compared to April 2020.
The 259,242 CPO units sold during April were 9% fewer than March’s 286,061, which was a record-breaker. March units sold increased 36.4% from February 2021 (which was actually less than February 2020) and an 80.4% YOY increase from March 2020.
More than one-third of CPO sales during April were Toyota, Honda and Chevrolet models. Add Ford and Nissan to the list and these five brands represented 44% of all CPO sales.<br>
slide5. At the New-Vehicle Dealership According to data from the National Automobile Dealers Association (NADA), new-vehicle dealerships sold 1.2 million fewer used vehicles during 2020, or 13.7 million compared to 14.9 million during 2019.
Trade-ins on new vehicles (41.6%) were the largest source of used vehicles for new-vehicle dealerships during 2020, followed by auction purchase (27.5%), trade-ins on used vehicles (23.7%), street purchases (6.8%) and other (0.4%).
The NADA’s March 2021 Average Dealership Profile tells a different story, as used-vehicle sales increased 31.9% YOY to $5.88 million at the average dealership, which was 34.8% of a dealership’s total sales and 28.8% of total gross sales.<br>
slide6. Who’s Planning to Buy Used Vehicles? According to The Media Audit’s 62-Market 2020 Aggregate Survey, two-thirds (67.4%) of adults planning to buy a used car, van, truck, SUV or crossover during the next 12 months were 18–44, with 22.1% 18–24 and 45.3% 25–44.
Of these adults 18–44, 37.6% were white-collar workers, 16.3% were clerical/sales workers, 11.7% were in professional/technical occupations, 9.7% were proprietors or managers and 9.3% were blue-collar workers.
Households with parents 18–44 and children at home of any age were more than half (51.8%) of these adults planning to buy a used vehicle. Adults 18–44 who were younger than 35, single and with no children were second at 29.2%.<br>
slide7. What Are Their Media Choices? Unsurprisingly, the Internet and TV were the top two media where adults 18–44 planning to buy a used vehicle spent most of their daily media minutes, or 23.1% and 21.4%, respectively. Radio was third at 16.4% and billboards over-indexed the most, by 23 points.
Comparing the percentages of adults 18–44 who are not exposed to major media is also insightful: weekday newspaper 64.2%, Sunday newspaper 62.9%, radio 25.1%, direct mail 16.3%, TV 9.5% and the Internet 3.5%.
These adults are also audio streamers, as 57.6% streamed YouTube Music during the past 7 days, followed by 48.9% Spotify, 33.7% Apple Music, 31.1% for both iTunes and Google Play Music, 30.9% Pandora and 30.3% Amazon Prime Music.<br>
slide8. Advertising Strategies With inventories limited, used-vehicle dealerships could promote a free dinner for two at a local restaurant that is reopening when consumers trade in a vehicle of a particular age, model or value.
Use the table at the top of page 3 of the Profiler to create some promotional incentives to attract customers, such as a $50 gift certificate at a local garden center or tickets/concession dollars to a movie theater when it reopens.
Promote a “Budding Entrepreneur Day” and offer a discount to anyone who has started a new business as the pandemic wanes. Take a photo and promote their new business on the dealership’s Website and social media pages.<br>
slide9. New Media Strategies Used- and new-vehicle dealerships can use social media to highlight their inventory of certified-pre-owned vehicles (CPOs) and promote them as an alternative to a higher-priced new vehicle and waiting for new-vehicle inventories to return to normal levels.
Used-vehicle dealerships can benefit significantly by asking recent customers to share their car-buying and customer service experience on social media, including relating how their purchase alleviating a transportation challenge.
Consider an onsite Treasure Hunt promotion. Provide a list of items to customers via a text message they must note while shopping onsite for a vehicle and offer a percentage point off the price of their vehicle for each item noted.<br>