Watch For These Used Vehicle Trends Through 2019

 > Sales mostly flat

 > New vehicle prices spur more Used vehicle shoppers

 > Increased Used inventory means larger depreciation

Much like the year before, 2019’s new and used vehicle market is moving apace. Sales have been decent enough – with no real jumps in profits. However, analysts still warn of the impact of higher vehicle prices on the auto industry in general, which may mean greater margins for used car dealers.

With many in the industry voicing their concerns, there are a few used vehicle trends you should plan for in 2019.

 

Sales Will Mostly Be Flat

Plenty of organizations are predicting flat sales. Both NADA and other economists expect the new car sales to be lower than 2018’s 17.3 million. Beyond that, according to Automotive News’, David Muller, senior economist at Cox Automotive, Charlie Cox, said:

“We estimate the market to be around 39 million and a half on the used side in total.”

In 2018, used cars saw a slight increase in sales in comparison to the new market. However, this year, they don’t expect the sales to increase by any substantial measure – which would end the 5-year gain the used market had been experiencing.

 

Increased Vehicle Costs Will Turn Customers To The Used Car Market

As manufacturing prices continue to rise, so will new dealership prices, and therefore use vehicle prices. However, the key difference here is that used vehicles will ultimately be the cheapest option for consumers.

The chief economist at Cox Automotive, Jonathan Smoke said: “The fundamentals remain solid; used-vehicle demand is at a peak. Wholesales supply is now post-peak and starting a gradual decline. The used market is the answer to the affordability challenges in the new market.”

 

Lease Maturities Will Peak

In 2019 alone, Automotive News’, David Muller, says more than 300,00 vehicles will come off lease in 2019 in comparison to last year. According to Cox, maturities are expected to peak around 4.1 million units– which comes three years after new light-vehicle sales hit a record of 17.6 million.

Executive Vice President and Chief Economist at ADESA Analytical Services, Tom Kontos said: “So With a high percentage of purchases happening upstream, there were comparatively fewer vehicles working their way downstream into physical auctions.” Which assisted in keeping prices from falling fast.

 

There Will Be Larger Depreciation

Since there will be an increase in supply, there’s an expected increase in the rate of depreciation as well. According to President of Operations at Black Book, Anil Goyal, the rate of depreciation for 2018 was 12.4%. However, he said the rate will go up to 15% in 2019.

 

There Will Be An Increase Of SUVs In The Market

Companies, such as Ford, are going all in with trucks and SUVs. According to Tom Kontos, “Even if supply growth in total is fairly moderate, the growth in crossovers and SUVs is going to be fairly significant.”

 

Bottom line: Used vehicle sales will be close to last year’s peak levels, which is good news. Demand will remain steady, partly fueled by higher new car pricing. SUVs and Crossovers continue to dominate consumer interest, and vehicle inventories should generally match their needs.

Tariffs Are Still The Biggest Threat To New Car Dealerships In 2019

With the agreement between the United States, Mexico, and Canada (USMCA), some of the previous tariffs’ impact has been erased. However, according to NADA News, Section 232 of the Trade Expansion Act of 1962 will still have negative effects with tariffs on automobiles and vehicle parts. A report by the Center for Automotive Research (CAR) says vehicle prices will go up– trickling down from the manufacturers to new/used car dealerships, and then to the consumers.

Back in July 2018, CAR’s research concluded that the tariffs would lead to a considerable increase in vehicle prices. It also showed manufacturers and dealerships would see a decline in annual new-vehicle sales and industry jobs. In CAR’s latest report, they created a total of ten different scenarios using U.S trade policies, Section 232 autos, auto parts tariffs (steel/aluminum as well), the USMCA agreement, and Section 301 tariffs involving Chinese imports.

According to NADA News, if the USMCA agreement is launched in its current state, CAR anticipates that:

  • Up to 366,900 U.S (77,000 of which are franchised dealerships) will be lost.
  • The average price of U.S. light-duty vehicle prices will go up by up to $2,750.
  • New U.S. light-vehicle sales will see a decline of up to 1.3 million units per year.
  • Consumers will be forced into the used car market.
  • Vehicle repair and maintenance costs will drastically increase for consumers.

CAR estimates that Section 232’s tariffs on automobiles and vehicle parts will be responsible for roughly 90% of the total economic problems that result from collective trade policies. In its conclusion, the most recent CAR report notes, “While the trade restrictions adopted or under consideration are intended to assist U.S. workers, these policies are likely to be extremely disruptive to and negative for the U.S. economy.”

NADA CEO, Peter Welch, says: “This analysis confirms that broad Section 232 tariffs on autos and auto parts still present the biggest trade-policy threat to consumers and the U.S. economy. NADA understands and appreciates the Administration’s attempts to level the trade playing field and eliminate unfair trade practices, but expensive Section 232 auto tariffs are the wrong tool for the job because they will lead to dramatic price increases, depressed vehicle sales, and job losses.”

In July, Welch spoke before the Department of Commerce and requested the Administration abstain from applying the broad-based tariffs on automobiles and vehicle parts.

“We should continue to work together to address genuine trade concerns, but without hurting American consumers, and small businesses in the process.”

Auto Dealerships Will Be Just Fine In 2019

New & Pre-Owned Sales signAccording to NADA News, Senior Economist for NADA, Patrick Manzi, said trends are looking good for both new and used vehicles in 2019.

He continued on and said in a recent speech in San Francisco: “The current posture of the U.S. economy is strong. A tight labor market continues to put upward pressure on wages, which are rising. Consumer spending, a significant contributor to GDP, remains solid. It’s a positive sign that consumers are spending money.”

In 2019, NADA expects there to be roughly 16.8 million sales in light trucks and new cars– a 3% decrease from 2018’s fourth straight year of 17 million units.

However, Manzi warned that the rising interest rates for auto loans will impact the affordability of vehicles for consumers in the coming year. With rates and monthly payments expected to rise, he says younger consumers will shift to the used car market. “This is a great opportunity for dealers to get these customers into nearly new certified-pre-owned vehicles.”

With the used car market’s expected increase, software companies have developed software to make the reconditioning process as efficient as possible to maximize profits. Products like ReconMonitor can help you track each vendor or employee task and identify what order those tasks are being performed. This helps you execute auto remarketing at maximum speed, and ensure you have the stock available to meet consumer demands.

NADA Chairman Says Dealerships Need To Be Active “Now More Than Ever”

According to NADA News, the new NADA Chairman, Charlie Gilchrist, strongly recommended that franchise-owned dealerships need to be active in NADA “now more than ever.”

He continued on with his recent speech in San Francisco and said: “I want you to think of your association as your second identity. It’s always a part of you, and it’s always there. That’s a big deal, whether you’ve been working in this industry for decades or you’re just getting started.”

President of Gilchrest Automotive, Charlie Gilchrist, has franchises including Ram, Nissan, Ford, Volkswagen, Buick, GMC, Chevrolet, Jeep, Dodge, and Chrysler all in the DFW area of Texas. His obvious success quickly reminded everyone in the Moscone Center that being a franchise owner is the best way in the world to distribute vehicles. However, he also discussed some of the major challenges dealerships of all sizes are familiar with and will have to prepare for down the line.

“My challenge to each of you today is to get involved,” Gilchrist said. “You are not just ‘a member’ of NADA. You are NADA.” He then followed up with: “Profitability in our new-vehicle department is a serious issue. This means we have to be better, and more creative, at running the rest of the store. We must adapt to this reality to survive in this new world.”

Beyond that, according to NADA News, Gilchrist urged the entire auto industry to unite together to help tackle the issue of technician shortages in the retail sector by supporting the NADA Foundation Workforce Initiative.

With the shortage of technicians and the many challenges ahead for dealerships in 2019, software companies are working hard to help manage and automate the workflow of dealership operations. Among the leading products is ReconMonitor, a state of the art workflow automation software for auto recon, dealerships, and auto remarketing companies. ReconMonitor dealership software decreases reconditioning cycle time and increases your dealership’s operational control and profitability.

Retired NADA Chairman Says Dealerships Are Writing The Future

Wes Lutz – Former NADA Chair

Recently in a speech in San Francisco, now retired NADA Chairman, Wes Lutz, advocated for dealerships in America to fully embrace the changing times for dealerships. Advising them to truly listen to their customers and discussing what the future of the auto industry holds.

According to NADA News, Wes Lutz is the president of Extreme-Dodge-Chrysler-Ram in Jackson, Michigan. Lutz was the head of NADA and was there to see new-vehicle sales go beyond 17 million units. However, he also predicted that personal vehicle ownership would eventually end.

“As I traveled around the world in 2018, my biggest takeaway was this” So many people want to write our narrative. They say that dealerships are fighting the inevitable, that change is coming and we don’t like it,” he said during his speech. “The truth is that we love change. Change is not happening fast enough for us. Dealers aren’t fighting the future, we’re writing it.”

Lutz continued on: “People prize convenience above all else. People value freedom above all else. The ability to just get up and go without waiting for anyone is a luxury that people don’t want to give up – they can’t afford to. Which is why people have very little interest in giving up their keys, despite what Wall Street or Silicon Valley says.”

With customer convenience at the forefront of dealership focus, software companies have management software available to help make dealership operations, and the customer’s life as easy as possible. Products, like ReconMonitor, have fully customizable forms and triggers that can notify customers of their vehicle’s status, and alert vendors and employees when their work is coming up. No more phone calls required to keep everyone informed.

8 Trends Your Dealership Should Pay Attention To In 2019

Dealership Software and Operations

  • Sedans Losing Popularity
  • Electric Vehicles Gaining Popularity
  • Self-Driving Vehicles Become More Common
  • Artificial Intelligence Integrations
  • Subscription Plans
  • Electric Systems Will Improve Drastically
  • Used Vehicles Remain Popular
  • Used Car Reconditioning Industry Will Grow and Evolve

2018 has been a volatile year for the auto industry. It started off with a lot of uncertainty, but as everything has begun to fall in place, we now have a clearer picture of where it’s all heading. There’s been a growth in the economy; however, new vehicle sales have gone down. The tariffs that were created to help American companies, unfortunately, had a negative impact on automobile manufacturers both internationally and here in the states.

New vehicle dealerships made money, but the profit margin dropped a little. Beyond that, new cars are struggling while used vehicle sales are going up. Now, more than ever, the reconditioning industry has become increasingly important for both consumers and dealerships. With all of that in mind, let’s look at the most important trends to look out for going into 2019.

 

Sedans Are Losing Popularity

Ford and Chevrolet are expected to drastically reduce their sedan production come 2019. This trend first became known when Ford announced they would discontinue all of their cars outside of the Mustang and Focus Active, and will continue producing their trucks and SUVs. With two of the biggest vehicle manufacturers changing focus, you should expect others to follow in their footsteps. For many, it’s expected that SUVs and Trucks will be the most popular vehicles by 2020.

 

Electric Vehicles Will Only Continue To Increase In Popularity

With companies, such as Tesla, prioritizing all-electric vehicles, it should be no surprise electric has become as popular as it has. No matter where you look, you’ll see traditional manufacturers following suit. There’s the BMW i3, Volkswagen e-Golf, Hyundai Ioniq EV, Chevrolet Bolt EV, and more. Beyond that, hybrids remain a popular transition vehicle from gas to electric.

No matter what, electric vehicles will grow exponentially in popularity. In the US alone, you may have already seen an increase in charging stations. With companies shifting their focus to hybrids and all-electric, it’s important to know how much they’ll impact the industry.

 

Self-Driving Vehicles Will Slowly Become More Common

It’s safe to say we are still a couple years from having fully autonomous vehicles on a mass scale. However, with all of the sensors in vehicles today, it’s easy to see where the market is heading. We already have proximity sensors, parking cameras, built-in navigation, and other self-adjusting features being implemented into our vehicles.

Beyond that, companies such as Toyota and Ford have already begun investing in self-driving vehicles. This trend was further bolstered when Congress signed a bill in support of self-driving technology. It shouldn’t surprise anyone to hear that self-driving vehicles are being looked into by companies, such as Uber, for commercial use as well.

 

We’ll see AI Implemented Into Vehicles

Whether it happens in 2019 or not is up in the air, but it’s hard to deny that the use of AI has been steadily increasing. Whether it’s our smartphones, tablets, or computers, there’s an AI to help. There’s Siri, Cortana, and Google Assistant, and manufacturers like BMW have already partnered up with Google.

 

Subscription Plans Are Looking Like They May Be The Next Big Thing

Companies like Porsche, Cadillac, and Lincoln already have subscription plans in place. If you’ve been in the auto industry for long enough, you know that the big changes tend to happen with luxury vehicles first, and then trickle down over the years to standard vehicles. Beyond that, we simply live in a time where subscriptions are the big thing. Whether it’s Amazon, Netflix, Spotify, or even gym memberships, subscriptions are the way of the future (for now).

Subscriptions for the car market benefit consumers. It provides them with the opportunity to upgrade or acquire a new car much more easily than they currently can in our buy-or-lease market. However, subscriptions are also great for automakers because consumers will feel obligated to stay within brands.

 

Electric Systems In Vehicles Will Improve Drastically

This is something you may have heard about a couple of years ago, but it’s now looking increasingly likely to happen soon. In the near future, 12-volt electrical systems will be phased out, and eventually replaced, by 48-volt systems. This is because we live in a digital age where we have computers in our pockets, navigation and sensors in our vehicles– all things that require an increasingly larger amount of power.

 

Used Vehicles Will Continue To Grow In Popularity

The used car market is a billion dollar industry already. But if the last year has shown us anything, it’s that it is slowly taking over vehicles sales. In the US, alone, the average vehicle out on the road is 11.5 years old. This means more and more consumers are keeping and maintaining their cars for much longer. Beyond that, as a result of the tariffs and the vehicle price increases, used car dealerships have become the preferred option for many people.

 

The Growing Used Car Industry Will Evolve Reconditioning Processes

With vehicles becoming increasingly sophisticated and consumers driving cars for much longer, the reconditioning process will have to evolve. Right now, some of the most successful shops have already anticipated the change and have adjusted accordingly. They’ve stopped relying on paper and inefficient methods. You’ll see shops getting the latest paint booths, the fastest paint dryers, and workflow management software to track jobs and tackle constraints.

In fact, with the sophisticated technology in cars, you’ll need better equipment, better-educated technicians, and faster ways to organize, track, and adjust your lean processes. Everything will need to be done quicker, and you’ll need to embrace technology in this digital age.

Management software can track where vehicles are, how long each step takes, who’s working on them, what’s wrong with the vehicles, what work has been done, and more, all on mobile and back-office devices. It’s designed to make the reconditioning process more efficient so you and your technicians can upload documents, take photos, and apply updates for everyone to see in real-time, at the click of a button.

 

AutoMobile Technologies Can Help

AMT offers software solutions designed to make your reconditioning business more efficient, provide you with better visibility, and give you peace of mind knowing that your back-office is always up-to-date.

ReconMonitor is a state of the art workflow automation software for auto recon, dealerships, and auto marketing companies. ReconMonitor dealership software decreases reconditioning cycle time and increases your control and profitability.

ReconPro is the industry’s most versatile and powerful software solution purpose-built for auto recon professionals. With essential tools for performing PDR estimates, hail and insurance matrixes, parts management, paint code lookups, integrations with DMS, body shop crash systems and accounting systems, too. ReconPro manages the details of running your business so you can focus on growing your business. 

With your dealership managing recon workflows in ReconMonitor, and your vendors and technicians using ReconPro, you have a complete digital ecosystem for end-to-end visibility and efficiency in your reconditioning operation.

Advantages of the Trade Tariffs for the Reconditioning Industry

Increased prices on new cars and parts spur greater reconditioning investment

The reconditioning industry has been experiencing a huge boon in 2018. This is partially a result of the 25% tariffs on steel and 10% on aluminum placed by the US on Canada, Mexico, China, and the European Union. And while automobile manufacturers and new car dealerships are scrambling, the reconditioning industry is popping as consumers continue to drive and maintain their vehicles longer.

According to V12Data, the reconditioning industry is forecasted to reach $722.8 billion by 2020. So while there are legitimate concerns surrounding the increased costs for manufacturers driving up the price of new cars, things are looking up for anyone working in reconditioning.

The automobile industry is still profiting despite the impact of the tariffs, but there’s an air of anxiety that increased prices may be discouraging consumer purchases. V12Data reports the average age of vehicles out on the road in 2018 is 11.5 years old. So while decreased new car purchases may be a result, the older age of cars means consumers are spending more to keep their vehicles up and running.

According to the International Trade Administration and Washington Post’s, Heather Long, 79% of all steel and 90% of all aluminum are imported into the U.S. Beyond that, automobile brands such as Honda, Nissan, and Toyota are manufactured in Canada, Mexico, and Europe before being shipped into the U.S. Essentially, this means both vehicles and car parts imported into the U.S. cost more under the current set of tariffs– impacting domestic brands like Jeep, Chevrolet, and Ford, as well.

Despite the worries, many PDR and SMART Repair practitioners are seeing increased growth now more than ever, with 75% of reconditioning in the United States done by independent, and domestic auto repair shops. To put it simply, the tariffs aren’t doing car manufacturers or new car dealerships any favors; but they’re helping the reconditioning business become heavy hitters in the marketplace. As new car prices rise, drivers are inspired to operate and maintain their vehicles for decades at a time.

Even prior to the current administration’s tariffs, the reconditioning industry has been increasingly popular. SMART Repair practitioners receive business for dent removal, windshield chip repair, paint correction, wheel repair, and detailing. In comparison, dealerships, outside of vehicle purchases, mostly receive business for tire rotations, oil changes, air filters, and car washes. So, SMART operations are providing consumers with a lot more options when it comes to vehicle maintenance.

And beyond that, there’s an incentive for consumers to seek out SMART Repair professionals because they are driving and maintaining vehicles for increasingly longer periods of time. So with the tariffs on manufacturing, new cars, and OEM parts, the reconditioning industry has been steadily growing in popularity among owners of used and older cars. So if the trends continue, reconditioning will remain incredibly profitable for years to come.

AMT is committed to helping reconditioning professionals maintain and grow their business for optimal results. With owners willing to invest in keeping their vehicles in good condition, demand for recon and cosmetic services will become more active. Managing your workflow and employees to capitalize on that demand is crucial for your operation. We can help.

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Auto Analysts’ Crystal Ball Says Prepare Now for a Surge in Used Car Demand

How prepared was your dealership for 2017’s roller-coaster ride of new and used car sales?

If you are like many dealerships, you weren’t prepared for the unusual hurricane-induced car buying demand spike in the Fall that usually happens after tax refund time in the Spring.

crystal ballIt’s a dealership’s worst nightmare to be caught during a spike in sales demand at a time of low inventory, and then be forced to sit back and watch as potential customers head over to your competition.

Then, as you scramble to purchase inventory and get it frontline ready, you can almost watch the revenue slip past your balance sheet. Will you get the cars cycled out before the demand is gone?

Oh, to have a reliable crystal ball during auction time!

Actually, if you know where to look, there already is one. Auto Industry forecasters are expecting lower price volatility than 2017’s record highs and unusual fall spike. These same prognosticators also predict higher volumes of used vehicle sales in 2018.

The crystal balls reveal that a more desirable mix of late-model vehicles entering the marketplace and higher take-home pay as the new federal tax law is implemented, will heat up the used car market, so you might want to prepare yourselves now and reap the rewards when the buyers start coming.

From almost the minute the new tax law was passed, large corporations began announcing bonuses and pay raises for American households. Cox Automotive Chief Economist, Jonathan Smoke, revised his forecast of 2018 total used-vehicle sales to nearly $40 million.

At a recent conference call with investment analysts and reporters, Cox stated that they estimate 85% of US households will see an income increase as a result of the new tax laws. Cox also anticipates a 2 to 4 percent decline in 2018 U.S. new light-vehicle sales to fewer than 17 million units.

By now, all the Harvey and Irma hurricane victims have replaced their cars, so that spike in new and used car sales as replacement vehicles ended in December of 2017.

Still, experts believe that the U.S. economy will continue its strong demand for new and used vehicles in 2018 due to a low unemployment rate, strong financial markets and consumer confidence, and incentive offers from automakers.

 

Where will the used inventory come from?

It has been predicted that 2018 will be a slowdown in the increasing numbers of late-model vehicles entering the used market, with 2018 lease returns growing only 8.1 percent to 292,000 units.

And most of the growth is in pickups and SUVs, which are more in demand, so grounding dealers will retain more off-lease vehicles themselves.

Expect to see lower rental car-fleet vehicle returns, fewer coupes and hatchbacks, will fall this year, But there will be an increase in pickups, SUV’s and crossovers.

How to stay ahead of the demand.

Following the economic downturn started in 2008, car buyers’ desires for new vehicles leaned heavier towards cars than trucks. This caused a mismatch in the used market as consumers started leaning back towards trucks and SUV’s during the upswing.  But in 2018, half of off-lease vehicles are expected to be light trucks.

Heed the warnings.

Retailers who sell late-model SUVs and crossovers will benefit from declining used-vehicle prices this year, that could squeeze dealerships’ volumes and margins on new light trucks

Cut your frontline cycle times.

Now is the time to focus on the operations and look for ways to eliminate bottlenecks and unnecessary snarls.

Efficiencies save profits

The focus on fast and efficient reconditioning becomes even more important to maintaining margins on new car inventories as used car demand puts pressure on new car pricing. A small investment in a recon software such as ReconMonitor can mean the difference between profit and loss during a squeeze like the one being predicted now.

As a used car dealer, the decision to pursue CPO designation for select vehicles can be advantageous, making initial inspections even more crucial. Again, any investment in automation can pay for itself. When used car demand is high, each day lost in the recon stage is money wasted. Consider streamlining the intake phase with an investment in inspection software such as InspectionNotes from Automobile Technologies. Why waste time entering and transcribing vehicle details and management of recon needs on paper, when a single mobile recon app can eliminate hours of work?

 

2018 may not be as bumpy a ride as last year, but it’s sure to have surprises of its own. Staying attentive to the market is as close as we’ll get to that crystal ball, and maintaining an efficient operation will keep your dealership rolling smoothly.


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