Economic and industry factors can have a significant impact on any industry. In a recent webinar, Tom Webb—chief economist for Cox Automotive—discussed industry and economic factors that will likely impact the used car market in 2017.
The two dominant economic factors that typically determine the health of the used car market are the labor market and credit conditions. Total employment saw less growth in 2016 than in previous years. However, that was to be expected given that the start of the year had an official five percent unemployment rate. Extremely weak wage gains and low productivity growth labor participation rates remain at 40 year lows. Despite those negatives, conditions remained favorable for the used car market primarily because of stability. Jobless claims are at an all time low, and Webb is hoping 2017 will bring a much needed increase in wages and job growth for car consumers.
Auto loans from 2011-2016 experienced a 58 percent increase. Though household income and wealth has not increased significantly, low interest rates, a shift in consumer financial obligations and longer loan terms have changed a consumer’s ability to purchase vehicles and pay back their loans.
Used Vehicle Retail Sales
Combined sales of used vehicles increased for franchised and independent dealers for the seventh consecutive year. At this point in the cycle, used vehicle sales have shown faster gains than new vehicle sales. Independent dealers normally gain back a little share from franchised dealers around this time because wholesale supplies open up.
Better mix of vehicles coming to auction
Because wholesale supplies open up, like the sale of rental fleets and the increase in off-lease vehicles, will mean a better variety of vehicles will be coming soon to auctions and other inventory sources. The diversity of vehicles available in terms of make, manufacture, color and model mean that dealers will have more choices and chances to find the vehicles their customers want.
If you are interested in learning more about current economic conditions and trends in the automotive industry, watch Tom Webb’s Webinar below.