With the average new vehicle sticker price at $40,000, buyers are turning to so-called 'gently-used' vehicles and that trend is likely to cause a massive market shift
In this Sunday, April 15, 2018, photograph, unsold 2018 Renegades sit on a Jeep dealer's lot in theConsumers may finally be nearing a breaking point as new vehicle prices continue to rise, causing a seismic shift in the marketplace as shoppers scramble to find the models they desire at prices they can afford—and that’s danger for the automakers.Charlie Chesbrough, Senior Economist, Cox Automotive, speaking in Detroit, Jan. 13, 2020.
In 2012, for example, vehicles priced below $30,000 accounted for 51% of the market, but by last year, that share shrunk to just 28%, according to Cox research. In comparison, vehicles priced above $50,000 accounted for just 6% of the market in 2012, but grew to 24% last year. “What's keeping us at 17 million is the fleet side of the business,” explained Chesbrough, who pointed out that a change in federal tax laws in 2017 provided a windfall for businesses who bought new vehicles for their commercial fleets. The new regulations allowed for increased tax write-offs for vehicle depreciation—some as high as 100%.
“This is a real threat to the new vehicle side because these vehicles are selling at a fraction of the price of new vehicle counterparts,” said Chesbrough. “The products consumers are most interested in are selling at 30%, 40%, 50% discount to their new counterparts.”The attraction to gently used vehicles is evident in rising sales. Combined, 28 million new and gently-used vehicles were sold last year with gently used, model year 2000-2004 vehicles, accounting for 11.
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