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Have you noticed that the average used car you’re selling is younger and pricier? The recent popularity of leasing is pouring young used cars into the market at unprecedented levels.
Edmunds' analysis found that average used car prices hit a record high of $18,400 in the third quarter of 2015, up 6.3 percent — or $1,100 per vehicle — from the third quarter of 2014. Meanwhile, the average age of used cars sold in Q3 2015 was 4.3 years, down from an average of 4.6 years the same time last year.
This is music to the ears of a franchised dealer who recognizes the opportunity to sell more certified pre-owned cars.
In Q3 2015, dealers sold over 653,000 vehicles through CPO programs, the highest-ever volume for the third quarter. CPO sales accounted for 21.8 percent of used sales by dealers, another record for the third quarter.
These highly profitable cars are here; now the challenge is keeping a steady stream of buyers interested. The timing is great, as growing numbers of Millennials are coming into the market with an appetite for lower priced cars equipped with the technology that can be found in many younger used models.
In support of its new Used+ car shopping service, an innovative used car sales program carefully designed and market-tested for effectiveness in closing used car deals quickly and beneficially, Edmunds has been studying used car buyer behavior and has come upon some interesting learnings:
In a recent survey conducted on behalf of Edmunds.com by Instant.ly, 88% of respondents said that if they were to consider a used car, they would be willing to pay more for a certified pre-owned vehicle. Of those who were willing, 37.8% said they would spend up to an additional $1,000 while 36.9% of respondents said they would spend up to an additional $500.
Edmunds found that mobile users are at least 2.5 times more likely to click on ads than wired site visitors. This result holds for both retention and conquest ad campaigns. Mobile ad engagement has tripled compared to last year, and is trending to continue proving effective.
When determining condition of a used car, 81% focus on the vehicle’s mileage, 77% focus on the vehicle’s age and 67% focus on the wear and tear, according to Edmunds’ research. To draw the most interest from shoppers browsing the Internet for the perfect used car, your online communications should anticipate and address these topics of interest.
Of the non-CPO used car buyers that Edmunds talked with, 28% were getting rid of their old cars because they needed expensive repairs. Of the CPO buyers that Edmunds talked with, 24% were motivated to shop for something newer because they were nervous about the safety and/or reliability of their old cars. Moving forward, both sets of shoppers are likely to prioritize peace of mind when making a used car purchase. Dealers who address this need will be more likely to close more sales.
Edmunds compiles a wealth of detailed insights into the state of the used car market quarterly in a free report found at http://www.edmunds.com/industry-center/data/used-car-market-quarterly-report.html Here are some additional points of interest from the latest edition of the report
The average amount financed for a used car is $20,568, which is up two percent from last year. (The average financed amount is larger than the average price of used cars because many of the more inexpensive transactions are paid in cash and are therefore not reflected in the average financed amount.)
Loan terms on used cars are growing to offset higher average prices, and for the first time since before the recession, average APRs on used car loans are creeping higher.
Traditional SUVs are seeing the most price growth in the used car market. Passenger cars, on the other hand, are generally showing marginal year-over-year adjustments to prices, as a result of lower demand.