While 2017 and 2018 were characteristic of a “peak auto” theme for carmakers, a growing issue that may be pressuring new car and vehicle sales is that persistent used vehicle market. Buying a used vehicle can be tricky, but it’s also a much larger market than the new car market.
According to Edmunds, sales of used vehicles could hit almost 41 million in 2019. That would be the highest level of used unit sales since the recession and would top the 40.2 million used vehicle sales in 2018.
Edmunds reveals several issues having an impact on the new car market in recent weeks. One is that interest rates on auto loans reached decade highs. Another issue is that a record 4.3 million Americans will be turning in leased vehicles this year, and they should expect some potentially serious sticker shock when they return to the dealership to look at new cars.
In December of 2018, Edmunds forecast that new vehicle sales will continue to decline in 2019, a trend that started in 2017. The official forecast was for a total of 16.9 million new vehicles to be sold in 2019 after an expected 17.2 million vehicles in 2018.
Edmunds also showed that the price gap between new and three-year-old used vehicles back in 2013 was 56%, which came to more than $11,000 in savings on average. But in 2018, that price gap was 62%, or nearly $14,000 in savings on average. Despite maintenance being higher on used cars, it gets easier and easier to see why the used car market may be almost two and a half times the number of new vehicles sold.
The lease market also may be sending traditional leasers back into used cars as at least one facet of the issue here. Edmunds previously indicated that people who are leasing some of the most popular vehicles may find themselves seeing a price tag that is 26% higher than it was just in 2016 — and more than $1,600 over the life of the lease on average.
Ivan Drury, senior manager of industry analysis at Edmunds, said of the 2019 used vehicle outlook:
Typically sales of new and used vehicles follow the same pattern — if sales of new vehicles rise or fall, so do sales of used vehicles, and vice versa. But now we’re seeing new vehicle sales fall while used rise, indicating the market has reached a flash point. New cars are getting so expensive that they’re out of reach for many car shoppers, but there are so many more affordable used vehicles coming off lease that the market is naturally shifting in that direction.