Pub. 7 2017 Issue 2

10 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com T hree questions should be front and center when you evalu- ate your used vehicle inventory: 1. Compared with a year ago, how many of your used vehicles are less than three years old? According to the Q3 2016 Used Vehicle Market Report, 9.8 million used vehicles sold in Q3 2016. That is 3.3 percent more than Q3 2015, but franchise used sales went down 2.6 per- cent because there were fewer trade-ins at dealerships. Approximately 60 percent of all vehicles that were sold were three years old or less; four years earlier, in Q3 2012, the number was 46 percent instead — a 14 per- cent increase over a four-year span. Why the increase? Dealers have off-lease vehicles to sell and they want to maximize sales for certified preowned vehicles (CPO). What is the average cost of vehicles in your used inventory? The average cost of a used vehicle in Q3 2016 was $19,200, up from $18,400 in Q3 2015 and $17,900 in Q3 2014. The average price went up because dealers have focused on CPO sales as a good way to sell off-lease vehicles. They’ve also paid attention to the demand from consumers of SUVs and trucks. When gas prices are low, as they have been, people choose larger vehicles and are willing to accept lower gas mileage as a direct consequence of that choice. 2. How many customers trade in a vehicle when buy- ing a new one? The number decreased 45 percent between 2015 and 2016. People who buy a new car either do not have a trade-in or don’t want to trade it to the dealership. The average age of a trade-in was six years in 2016. Interestingly, 31 percent of all used car purchases had a trade-in, but 25 percent of those trade-ins had negative equity when the purchase was made. People buying a used car don’t seem to care how much money they owe on a car when they trade it in. EvaluatingUsedVehicleInventory