The landscape of affordable used vehicles has changed drastically over the last few years, helping the automotive aftermarket.
Four years ago, half of used vehicles sold for less than USD$20,000. Now, only one in seven used vehicles are priced that low, according to Lang Marketing.
Prices have soared more than 45 per cent since 2019, driven by semiconductor shortages and supply chain disruptions. The slowdown in new vehicle production has pushed buyers toward the used car and light truck market, resulting in a significant increase in demand, keeping the prices of used vehicles at elevated levels.
Moreover, not only are used vehicles more expensive, but they’re also older with higher mileage. Less than half of the used vehicles are under four years old, a stark contrast to 2020, when 57 per cent were no more than three years old. High-mileage vehicles have become more common in the used market.
“Today, used vehicles are much more expensive than four years ago and buyers get a lot less for their money,” Lang said in its report, Sky-High Used Car Prices Boost Aftermarket.
The decrease in vehicle leasing has also impacted the market. Only about 20 per cent of new vehicles are leased today, compared to nearly one-third in 2019. This reduction in leasing has led to a reduced influx of off-lease vehicles, which previously helped moderate used vehicle prices.
Dealers are finding that the strong demand for used vehicles is more profitable than selling new models, Lang noted.
“Used vehicles also provide dealers with bay volume in two ways: Repairing used vehicles to make them sale-ready and enabling dealers to develop long-term maintenance relationships with used-car buyers,” its report said.
The high prices are influencing vehicle longevity, reducing the rate at which older cars are scrapped and increasing the aftermarket volume. Older vehicles tend to require more maintenance, and consumers are more likely to invest in keeping their vehicles in good condition due to the high cost of replacement.
Looking ahead, while a slight price reduction is anticipated next year, “there is no returning to the lower-priced pre-COVID market, especially with new vehicle annual production continuing to remain considerably below 2015 to 2019 record-high levels,” Lang’s report said.