What’s Expected for 2016 New and Used Car Sales

Are new vehi­cle sales in the U.S. expect­ed to increase even high­er in 2016? And what impact might this have on used vehi­cle val­ues? Here’s what cov­er­age in The Wall Street Jour­nal has to say about it…….

New vehi­cle sales like­ly reached their high­est lev­el ever at about 17.5 mil­lion vehi­cles in the U.S. and may have been high­er than China’s new vehi­cle sales total. Ana­lysts are won­der­ing if the U.S. could hit the 18 mil­lion mark in 2016.

An improv­ing labor mar­ket and low inter­est rates have been fuel­ing U.S. car buy­er demand, and that’s like­ly to con­tin­ue in 2016. Gaso­line prices are expect­ed to stay low, which is help­ing grow pick­up and SUV sales. Sales incen­tives may be at fair­ly high lev­els this year, but the ris­ing aver­age cost of vehi­cles sold may con­tin­ue to off­set these incen­tive increas­es.

Soft­en­ing used car prices brings more risk to the auto­mo­tive indus­try. Used car prices had remained firm in recent years, but increased sup­ply from trade-ins and off-lease vehi­cles are expect­ed to bring down used vehi­cle prices in the U.S. this year. There’s con­cern that a vis­i­ble used car price drop could can­ni­bal­ize new vehi­cle sales.

ADESA’s Tom Kon­tos says that trade-in val­ues have been worth less late­ly, which means that con­sumers some­times recon­sid­er buy­ing a new car if they can’t find as much equi­ty in the deal. Aver­age terms of new-vehi­cle loans are climb­ing, which can fur­ther reduce the consumer’s equi­ty val­ue.

That could bring back the new vs. used vehi­cle sales com­pe­ti­tion at deal­er­ships that were seen very often in 2011 through 2013.

Watch­ing what the Fed­er­al Reserve may do will be close­ly fol­lowed by auto indus­try observers. A sig­nif­i­cant rate increase could tight­en indus­try prof­its, said Mark Wake­field, head of the auto­mo­tive prac­tice at con­sul­tants Alix­Part­ners LLP.

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