Trade-In Volume More Plentiful & Older; Which Dealers Benefit Most?

full story at Auto Remarketing

When it reaches the dealer’s lot, today’s trade-in has three to four more years on it than the cars that consumers were bringing in just a few years back, according to Black Book.

And the stores most likely to gain from this trend are the buy-here, pay-here businesses, the firm said.

“These trade-ins today are model years 2000 to 2005, and Black Book believes the mileage on those vehicles is between 150,000 and 200,000, significantly higher than mileage on trade-ins a few years ago,” said Black Book’s Ricky Beggs, explaining why BHPH dealers are likely to benefit.

“Because dealers can’t provide financing for vehicles of this age and mileage, they’re having to resell them at wholesale, and the BHPH businesses are the ones benefitting from this influx of inventory,” he added.

As previous analysis from Black Book has indicated, there is expected to be about 900,000 additional trade-ins this year, and much of this crop are the older units. So what’s causing this graying fleet of trades?

“Americans held onto their cars longer than they typically do over the past few years, which was felt when new-car sales fell as low as 10.5 million SAAR a few years ago,” Beggs explained.

“As the economy has turned around, a lot of this pent-up demand has helped spur more new sales,” he continued.

In fact, Beggs noted that the new-vehicle SAAR for 2012 is expected to be 1.5 million units stronger than last year, which leads to the aforementioned spike in trade-ins. He added that “a good portion of this additional trade-in volume fits in this higher mileage type and aged inventory.”