There are a number of reasons why the used car business is so attractive to dealerships, but perhaps the most notable is the profitability that used car sales can offer. While it's not secret that the margins on new car sales are continuing to thin, dealerships that have incorporated used car sales into their business models have fared well.
The internet is one of the biggest contributing factors to the shrinking margin of new car sales. Savvy consumers are able to easily turn to the internet to price shop and find what they think is the best deal on new vehicles. It can be more challenging, though, for consumers to assign an accurate value to a used car, so the internet becomes less of a negotiating tool. Also, a dealership with robust used car sales also often leads to a healthy service and parts business with repeat customers.
Those dealerships that have become heavily focused on used car sales due to the larger margins it offers should know that used car prices have recently taken a large drop. In fact, back in October, used cars for model years 2009 through 2013 experienced the largest monthly depreciation with a 2 percent decrease. Historically, the average pre-recession monthly depreciation has ranged between 1 and 2 percent.
Of this depreciation, the largest monthly depreciation experienced was through domestic cars, which declined by 3.2 percent. Import cars was the second group to experience the most depreciation, with a 2.3 percent monthly decline. Domestic trucks declined by 2.1 percent, and import trucks went down by 1.3 percent.
So what is the forecast for used vehicle prices in 2015? It's anticipated that vehicles coming off lease in 2015 will swell the used car market volume by 8 percent. The biggest influx of used cars entering the supply by far will come from luxury compact utility vehicles and sub compact cars. Large cars and mid-size pickups will have the least amount of inventory entering the used car market. While used vehicle prices are expected to decline between 2 and 2.5 percent in 2015, dealerships will still benefit greatly from having an emphasis on used car sales.
Which used vehicles tend to hold their value the best? Kelley Blue Book recently compiled a list of the top 10 cars that will best hold their value in 2015.
As an owner or manager of a dealership, you understand that it's important to stay up-to-date on depreciation trends as they can greatly impact your bottom line. Overall, while used car prices have taken a large drop, they should still yield a healthy profit margin for dealerships in 2015.
Those dealerships that have become heavily focused on used car sales due to the larger margins it offers should know that used car prices have recently taken a large drop. In fact, back in October, used cars for model years 2009 through 2013 experienced the largest monthly depreciation with a 2 percent decrease. Historically, the average pre-recession monthly depreciation has ranged between 1 and 2 percent.
Of this depreciation, the largest monthly depreciation experienced was through domestic cars, which declined by 3.2 percent. Import cars was the second group to experience the most depreciation, with a 2.3 percent monthly decline. Domestic trucks declined by 2.1 percent, and import trucks went down by 1.3 percent.
So what is the forecast for used vehicle prices in 2015? It's anticipated that vehicles coming off lease in 2015 will swell the used car market volume by 8 percent. The biggest influx of used cars entering the supply by far will come from luxury compact utility vehicles and sub compact cars. Large cars and mid-size pickups will have the least amount of inventory entering the used car market. While used vehicle prices are expected to decline between 2 and 2.5 percent in 2015, dealerships will still benefit greatly from having an emphasis on used car sales.
Which used vehicles tend to hold their value the best? Kelley Blue Book recently compiled a list of the top 10 cars that will best hold their value in 2015.
As an owner or manager of a dealership, you understand that it's important to stay up-to-date on depreciation trends as they can greatly impact your bottom line. Overall, while used car prices have taken a large drop, they should still yield a healthy profit margin for dealerships in 2015.
