In addition to headwinds in the new car business, there was great insight indicating that the large number of used vehicles coming into the market over the next year as off-lease units may not match up to what consumers are currently demanding in the market (which could put further downward pressure on used vehicle prices).
“There is some volatility in the pre-owned market,” Jackson said. “If you’re looking for something that was built in 2008, 2009, 2010, there’s relatively small supply since there was little production in those years. And so those vehicles are worth a premium in the marketplace.”
“There’s a lot of late-model stuff coming off lease,” Jackson said. “The issue is, more than anything, is it’s the wrong mix because the install capacity three, four years ago was heavily weighted towards cars, and that’s where the marketplace was pushed, even though there was already a strong migration towards trucks.
“So therefore, you have a mismatch between what the market wants to buy and what’s coming back to market. So you have some residual value pressures there,” he continued.
It’s going to be more important than ever for dealers to ensure that they’re stocking the right used cars on their lots (those colors and configurations that have strong local market demand), and continue to price them to market as their local supply/demand changes.