Why the used car supply is strong

With a lack of new vehicles available, consumers are turning to the used market. But can demand keep up with supply?

Yes, and it has been doing that quite well, reported Todd Campau, global aftermarket solutions associate director with IHS Markit. More used vehicles than ever before are becoming available as consumer driving habit change and some households do away with their extra vehicle.

According to automobile auction company Manheim, retail and wholesale volumes of used vehicles are at or around normal levels.

How is that happening if people aren’t buying new vehicles and selling off their old ones? To answer that, Campau looked at vehicles in operation numbers during his 5 Trends in 5 Minutes presentation at AAPEX 2021.

Because the pandemic kept people home, some didn’t bother registering their vehicles when up for renewal because they weren’t driving. A multi-car family may have parked one car and used the other for outings.

When restrictions and lockdowns were loosened, some of those vehicles were re-registered and added back into the fleet. Even so, Campau estimates that there could be upwards of 1.5 million vehicles in limbo.

Furthermore, A typical ratio of new vehicles to used sales is about 1:2. Campau said that number is now at about 1:3. However, vehicle values are skyrocketing due to demand.

Of course, this is good news for the aftermarket as the math has changed when consumers debate whether to fix their car or replace it. It may now be a cheaper option to fix their current vehicle rather than buy a new or even a used one.

“It extends the lifetime of those used vehicles that maybe people would have traded out to get a newer vehicle,” Campau said.

And there’s even more good news for the aftermarket since new vehicles aren’t entering the used vehicle space. “These are [older] vehicles that we already have parts for on the shelf, we already know how to repair and we already have plenty in the supply chain to be able to take care of them.”