Used Car Predictions and Trade-In Trends

October 27, 2019 in Trade-In Tips

There are plenty of used car predictions floating around from auto industry analysts about the near-term future of the used car marketplace. 

Current hot topics include used car sales forecasts, the future of digital retail, mobility trends, and more. 

We try to keep up with all of the trending topics in our industry. And today, we’ll wade into the fray with a few used car predictions of our own. 

Used Car Prediction #1: Dependence on Computer-Generated Vehicle Values Will Fade

There are two universal truths in our industry.  

  1. Every used car is as unique as the person driving it. 
  2. A used car is only worth what someone is willing to pay for it. 

Today's popular vehicle value services use algorithms that ignore vehicles on their own merit. They create a value range based solely on year/make/model/mileage and an unreliable estimate of the vehicle’s condition. 

But in reality, factors such as optional equipment, color combinations, VHR info, seasonality, regional supply and demand, parts and repair costs, mechanical condition, ownership history, and driving history all have a bearing on value. 

It's impossible for algorithms to accurately sum these factors, just as it’s impossible for dealers to consistently number their cars correctly when they rely solely on algorithms. 

The question of used car valuation is equally bleak for consumers. A recent analysis by The Appraisal Lane compared pricing across major value providers for a single 2019 Honda Accord Touring Sedan.  The leading tools produced a low value of $11,592 and a high value of $21,975 - a fairly meaningless range.

"One of our top used car predictions is that human involvement will be a must-have for successful appraisals," says Jeff Risner, CEO of The Appraisal Lane. "It's simply not possible for algorithms to consider every valuation factor. Dealers need real, live support.” 

Used Car Prediction #2: Trade-Ins Will Get the Attention They Deserve

Contrary to popular belief, the trade-in is one of the most important consumer considerations when it comes to buying a new car. 

The trade-in sets the stage for a new car purchase and defines the experience customers have with your dealership. It determines how much equity they have in their used car and how much purchasing power they bring to their new car. In many situations, the trade-in determines whether or not they can transact at all.

"The research is showing that the trade-in process can make or break a new car deal for millions of consumers every year," said Andrew Iorgulescu, The Appraisal Lane’s President. "An important used car prediction is that dealers will follow the consumer’s lead and start making the trade-in process a priority. The quality of the trade-in experience will be increasingly important." 

Used Car Prediction #3: Inventory Acquisition Will Be the Industry's Next Hot Button 

40.9% of a dealer's used car inventory comes from trade-ins on new car sales. As new car sales decline over the next five years, the availability of used car inventory will become an important issue. 

Industry analysts are also predicting an upturn in used car sales for the foreseeable future, as new car prices continue to climb and concerns about monthly payment affordability continue to mount. 

The result will be a spike in used car sales and a subsequent reduction in supply, which is already happening in a number of U.S. markets. 

"With depleted supplies, we anticipate that dealers will need to explore every possible avenue to acquire used inventory, including looking beyond their local market," said Chris Tomchay, COO of The Appraisal Lane. "That's really the only way they'll be able to replenish stock and maintain a steady flow of customer traffic. Inventory drives the flow of customers."

Chris advises dealers to look into The Buyer’s Network from The Appraisal Lane as a way to source used inventory. The new tool allows users to source live trades and aged inventory from other dealerships, and even to bid on cars directly from the consumer’s driveway.