"As far as I'm concerned, used is red hot," Andrew Stowe, Senior Director of Vehicle Valuations at J.D. Power, said at Used Car Week in Las Vegas. "This is where you want to be."
Dealers, for the most part, seem to agree. But they also know they have to capitalize on the strong market while they can, as factors such as affordability drive buyers away from new vehicles, which have been carrying little if any profit margins, anyway.
Some dealers, such as James Boening, Executive Director of Ourisman Lexus of Rockville in Maryland, are bullish on used. "We're pricing people out of the [new] market," Boening told Automotive News. "So I think used has a trajectory that's long."
According to the National Automobile Dealers Association's dealership financial profile, the average selling price of a new vehicle was $36,402 in the first half of 2019, compared with $35,249 in the first six months of 2018. The average used-vehicle selling price has been rising, too: It was $20,835 through June of this year for franchised dealers, compared with $20,390 in the same period a year earlier.
In another analysis of the average franchise dealership's financial profile, NADA found that through the first nine months of 2019, average new-vehicle department sales were down 1 percent, to $25.9 million. Average used-vehicle department sales during the same period rose 3.7 percent, to $15.2 million.
Dealers have been shifting their inventory more in favor of used-vehicle sales, which typically still carry a profit margin and allow retailers greater control of their destiny. Stowe said J.D. Power puts the new-to-used sales ratio for franchisees at 0.94 year to date in 2019, compared with 0.87 last year and 0.83 in 2017.
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