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Used Sales at a record high in 2010

Canada is primarily a used-vehicle market and this trend continued in 2010 according to data released recently by DesRosiers Automotive Consultants.

Used-vehicle sales of 2.89 million units – up 3.6 percent from 2009 – accounted for 65 percent of all vehicle sales in Canada last year. Used-vehicle revenue was also up, by 7.1 percent, and longer term it is the fastest growing aspect of the automotive sector in Canada, according to DesRosiers.

New-vehicle dealers, however, are accounting for a shrinking share of that expanding market. Their used volumes were down again in 2010 as consumers increasingly bought their used vehicles from independent used-vehicle dealers.

At the beginning of the decade, new-vehicle dealers accounted for 45.5 percent of used sales but their share is now down to 29.4 percent. Conversely, the independents, share grew from 20.2 percent in 2000 to 35.3 percent in 2010. In effect, almost all the share lost by new-vehicle dealers was picked up by the independents.

Independents have become very sophisticated with superstores, CRM programs, advertising, etc and they have significantly improved their image, according to DesRosiers. All these efforts have resulted in their increased market share.

The balance of that lost share has gone to the private market, in part because today’s vehicles are lasting so long and older vehicles are usually sold privately. Over 60 percent of the light vehicles Canadians bought over the last 25 years are still on the road today.

With respect to new-vehicle dealers’ share, a lot of them do participate heavily on the independent side of the market feeding those dealers vehicles and often having an ownership position with the independents, DesRosiers noted. So they participate indirectly rather than directly.

Consistent demand
Canadians bought a record 4.44 million vehicles in 2010, combined new and used, which is an increase of 4.6 percent over 2009 and a new record. This represented 20.1 percent of all the vehicles on Canadian roads – a figure that has remained relatively stable for several years.

That consistency means that approximately one out of five Canadian car buyers is in the market for a vehicle each year… it is just a matter of whether they purchase a new vehicle or a used vehicle.

This is good news for the market,” says Dennis DesRosiers, “since it indicates that Canadians will be in the market every year no matter what happens in the overall economy. In lean economic times we move as a group to favour more used product and in good times we buy more new product but the important thing for this industry is that we buy no matter what the economic climate.”

Although the transition has been gradual, used-vehicle sales are accounting for a greater share of the overall market. In 2000, used represented 56.6 percent of the market; it now represents 65.0 percent of the market.

This is because of the high quality of used product in the market, DesRosiers says. Consumers no longer are buying “someone else’s problem” when they buy used and this bodes well for this side of the market going forward.

Along with other factors, government regulations play a role in this shift, DeRosiers says. “The more the ‘cost of government’ increases for new vehicles, the more consumers just move to the used vehicle market.” This side of the market is slowly but surely becoming more competitively priced than the new vehicle market, he explains. When this happens, consumers simply buy used vehicles and for the most part there is nothing wrong with a used vehicle.

So, not only is the used-vehicle market healthy and profitable, it gives every indication of continuing to be so for the foreseeable future. Which raises the question, why aren’t new-vehicle dealers working harder to increase their share of that market, rather than letting it slip away.

By Todd Phillips, Canadian Auto Dealer, February 2nd

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