US car sales still strong, shifting to used vehicles: analysts

While new car sales have slipped from 2016, robust demand for used vehicles means US car dealerships will still see strong sales this year, industry analysts said Wednesday.

Jonathan Smoke, the chief economist for Cox Automotive, said the data already indicate the shift to more used vehicles is well underway.

"Dealers are selling more vehicles but the mix is changing and shifting from new to used," he said. 

Rebecca Lindland, executive analyst for Kelley Blue Book, said that shift is being driven largely by buyers under the age of 40, who now account for 29 percent of all vehicles sold in the United States and are much more likely to purchase a used vehicle.

"Affordability is a big issue for millennial buyers," she said.

New vehicles sales remain relatively strong but have slipped from their 2016 peak of 17.5 million vehicles, said Charles Chesbrough, Cox Automotive's senior director of industry insights.

"It's hard to say the industry is near collapse, barring a recession or some kind of financial event," he said.

Smoke said the strong sales of new cars and trucks in recent years, especially the SUVs beloved by American drivers, and spurred by incentives and discounts, mean the supply of appealing used vehicles has increased.

Dealers are also willing to pay more for used vehicles to insure they have an adequate supply, he said.

In addition, a significant number of leased vehicles are returning to the market as low mileage, relatively-new used vehicles, attractive to consumers. 

According to Cox Automotive data, 3.6 million lease vehicles will return to the market in 2017, up from 3.0 million in 2016. By 2020, 4.6 million off-lease vehicles will return to the market.

These off-lease vehicles are rapidly becoming an affordable, appealing alternative to new. More are on the way. 

"Overall, despite slowing new-vehicle sales, we think the automotive market is healthy," said Smoke. "Sales of approximately 17.1 million will make 2017 among the best years the industry has ever recorded. "