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WEAK USED-CAR SALES TO CONTINUE
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Manheim’s Webb: Used-car profits still key to dealers. |
February 3, 2007—Franchised dealers sold 2 million fewer used units in 2006 as used-car sales overall plummeted 2.6 million, Adesa vice president of analytical services Tom Kontos said at the convention Sunday. “I expect this softness to continue into 2007 unless and until used-vehicle sales are triggered by greater dealer discounting, ample tax refunds, and more solid economic growth.” With weaker used-car prices expected, 2007 will be a good time to buy used cars, he said.
But Manheim chief economist Tom Webb said in a press conference Saturday that used vehicles are still an important source of profit for franchised dealers, with net profit per used vehicle at $230 (net profit per new vehicle was minus $14).
Lease penetration rose 7.7 percent last year, said Kontos, as it has for two years. More units will come off lease from 2007 to 2009, but because they were priced more accurately than in the mid-'90s, more lessees and dealers will likely buy the cars at lease-end—so there will be no flood of off-lease cars.
Domestic automakers have cut program car sales and raised the prices of those cars to car rental companies, said Webb. Those companies will have more risk vehicles, which are a few months older than program cars. So the cars at auctions will be fewer and slightly older.
Another opportunity for dealers with space on their lots, said Webb: commercial fleets, new sales of which are up 30 percent since 2003.
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