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Carmageddon for New Cars, But Used Cars are Hot | Wolf Street

In 2018, new-vehicle sales will be a tad over 17 million units, retail and fleet combined. But used-vehicle sales will be about 40 million units, sold by franchised dealers (such as Ford or Toyota dealers), independent used-vehicle dealers, and individuals. The used-vehicle retail market is backed by a large and liquid wholesale market where rental cars, lease-turn-ins, repos, etc. are sold at auction to dealers.

The largest auto-auction company in North America, Manheim – running about 8 million used vehicles through its auctions and online venues a year – points out the demand for basic used cars in its auction report for November:

On a year-over-year basis, most major market segments saw price gains in November; but more affordable vehicles continue to see the greatest increase in values. Compact cars and midsize cars outperformed the overall market, while utility vehicles and pickups underperformed the overall market.

In other words, what’s hot in new vehicle sales (SUVs and pickups) is less than lukewarm in the used vehicle auction market. And what is ice-cold in the new-vehicle market (cars) is red-hot in the used-vehicle market.

J.D. Power in its Used Car and Truck Guide for November, said a similar thing. Year-to-date through November, prices of used vehicles up to five years old rose 2.8% on average. But…

On the mainstream-side of the market (non-luxury), prices this year have been supported by exceptionally strong performance of passenger cars. Compact car prices are expected to end the year about 9% above their position in 2017, while mid-size car prices are forecast to grow by around 7%.

Mainstream SUV prices are also up in 2018, but “not nearly to the same level as their car counterparts,” J.D. Power says. One of the primary reasons for this is “affordability. which favors more competitively priced passenger cars.”

And the luxury side is not doing well in the used-vehicle segment.

Prices are expected to be down for most [luxury] segments [cars or trucks], with some of the worst losses expected in the luxury mid-size car segment, which has seen steady year-over-year declines since 20012. Prices for this segment are expected to decline by over 7%.

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Carmageddon for New Cars, But Used Cars are Hot | Wolf Street.

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