United States Used Car Market is growing at a
robust pace since the past few years. The market is driven by several factors
such as rise in prices of new vehicles, higher interest rates, affordability,
slow depreciation, and manufacturer certified programs.
United States Used Car Market Scope
The used car market in the United States is
segmented into various parts, which comprise vehicle type, propulsion type,
sales channel, end user, region and competitive landscape. Based on the vehicle
type, the used car market is divided into hatchback, sedan, and SUV/MPV.
Furthermore, based on the propulsion type, the market is categorized into
internal combustion engine and electric. After this, used cars are sold through
two channels: offline and online. Therefore, based on the sales channels, the
market is divided into offline and online. The consumers of used cars are also
divided into categories, as the cars are either operated by a single person or
a company. So, based on the end user, the market is segmented into individuals
United States Used Car Market Overview
In recent years, the used car market in the
United States has been increasing at a rapid pace. There are several reasons
leading to the growth of this market, such as cost savings, slow depreciation,
more vehicle choices, and increased digitization. The used car market in the US
has been increasing over the last several years, but it particularly gained
pace during the COVID-19 pandemic. The production of new vehicles came to a
halt, showrooms were closed, and people drastically reduced their spending
during that time. As a result, the used car market started to increase as it
offered better alternatives to new cars at a lower cost. This trend continued
until 2022, as the supply of new vehicles was slow due to chip shortages. These
events caused a surge in the demand for used cars in the US, capturing a
significant market share during this time, and the trend continues.
United States Used Car Market Drivers
The affordability of used cars is one of the
main reasons for the rising used car market in the United States. New vehicles
are much costlier compared to used cars nowadays. Moreover, used cars are also
associated with lower taxes and reduced insurance costs, making them a good
choice among the available options.
The most effective strategy for success in
the used car industry may be to create trust-building initiatives, such as
Certified Used Vehicle Programs. These programs offer the most effective
protection against channel competition and enable dealers to significantly
increase their margins, while also providing an additional source of revenue
for Original Equipment Manufacturers (OEMs). These vehicles are used vehicles
that have been evaluated by the manufacturer to be in good working order. The
manufacturer confirms the quality of the used vehicle by offering a factory
The rapid digitization has also helped drive
the used car market in the United States. It is becoming increasingly evident
that the Internet is the primary source of information for used car buyers.
While consumers continue to rely on local newspapers and word of mouth when
researching used vehicles, they are increasingly turning to the web to make
their decisions. This emphasizes the importance of having a robust internet
strategy for used car programs. Dealers who have invested more in multichannel
communication tactics are beginning to see the results, with an increasing
number of them reporting that their web activities have improved sales and
extended their trading reach.
Depreciation has a significant impact on the
value of all vehicles. However, the depreciation rate for second-hand vehicles
is much lower than that of new vehicles. In most instances, the car's price has
already undergone significant depreciation, and by the time the vehicle is
re-owned, it will have emerged from the steepest point of the depreciation
curve. Furthermore, cars depreciate much less after the first three years than
when they are in their prime. Consequently, after buying a second-hand vehicle
and maintaining it for a period, the vehicle can still be sold at a reasonable
United States Used Car Market Trends
New vehicle margins are declining due to
global overproduction, increased competition among brands, and demanding
consumers. This has led dealers and manufacturers to offer greater discounts to
new car buyers. Used vehicles provide dealers with an additional source of
income and often higher gross margins, helping them maintain profitability
levels that are no longer achievable through new vehicle sales and service
business. The need to sell used vehicles to offset declining sales and service
revenue from new vehicles continues to grow.
The availability of data on the Internet has
enabled customers in all markets to access research material in unprecedented
quantities, ranging from dealer invoice prices to vehicle historical reports,
and they are more than willing to utilize it. The rapid digitization and
changing buying behavior of consumers are the primary reasons for the
significant growth of eCommerce in general. However, the automotive industry
has been lagging for a considerable period. With a decrease in dealer visits in
2020, a more digital purchasing solution has become essential. When customers
are presented with a more detailed, realistic online presentation, many auto
consumers are becoming accustomed to the idea of purchasing a vehicle entirely
online, rather than feeling completely alien to it.
It has become increasingly difficult for
consumers of all ages to sell vehicles in the private market due to increased
sales channel competition. This is because of the emergence of third-party
listing websites that feature multiple photographs, detailed descriptions, and
vehicle history reports to provide peace of mind to used vehicle shoppers.
Additionally, franchised dealers in the United States are facing increasing
pressure from the independent dealers' segment.
United States Used Car Market Challenges
Used vehicle prices have been on the rise
since the COVID-19 pandemic began. COVID-19 was a global health crisis coupled
with supply chain disruptions that intermittently halted new vehicle
production. As a result, there was a shortage of new vehicles on the market,
leading to record-high vehicle prices despite stable demand. The costs and
limited inventory prompted consumers to purchase used vehicles, resulting in
increased prices for pre-owned cars.
Traditionally, transparency has been one of
the biggest issues in the used car market. Buyers are concerned about the
accuracy of vehicle history reports, any accidents or damage, and hidden
mechanical problems. Building trust and ensuring transparency is a constant
struggle in the buying and selling of cars.
Market Recent Developments
- · In 2023,
CarMax, the nation's largest used car dealer and one of the biggest
used-car distributors in the U.S., is teaming up with Israel's UVeye to
offer AI-powered condition reports to buyers of auctioned vehicles.
- In 2022,
EchoPark opened its first Missouri store in the St. Louis market.
The US used car market presents several
opportunities for growth and innovation for its stakeholders. For dealers with
low digital presence, the focus should be on enhancing website design and navigation
through the development of clean, mobile-ready websites that prioritize the
products as the focal point of the experience. These websites should include
essential elements such as high-quality photos, sophisticated filtering, and
current vehicle inventory across locations and geographies. Incumbents should
also focus on target segments based on location and existing customer profiles,
ensuring that key processes, inventory, and marketing models are tailored to
the segments they are attempting to target. For established digitally savvy
dealers, the goal should be to leverage existing capabilities to create an
integrated omnichannel experience by enhancing real-time competitive
intelligence and digital marketing. This should include ensuring that offline
processes are in line with online processes in terms of transparency and
simplification for the customer, and that the processes are aligned with the
segments that the dealer is attempting to target.
Organizations of Original Equipment
Manufacturers (OEMs) should continue to bolster the competitive advantage of
their dealer networks by expanding their certified used vehicle (CVA) programs
and providing a comprehensive omnichannel platform. They can establish more
stringent requirements for preowned vehicle dealers and further enhance their
used car remanufacturing capabilities to meet the increased customer demand for
more costly and more up-to-date inventory.
The United States Used Car Market is divided
based on the Vehicle Type (Hatchback, Sedan, SUV/MPV), By Propulsion Type
(Internal Combustion, Electric), By Sales Channel (Offline, Online), By
End-User (Institutional, Individual) and based on region. Based on the vehicle
type the market is divided into Hatchback, Sedan, and SUV/MPV. Based on the Propulsion
type the market is divided into Internal Combustion, and Electric. Based on the
Sales Channel the market is divided into Offline and Online. Based on the End-User
the market is divided into Institutional, and Individual. And based on region,
the market is divided into North, South, East, and West.
eBay Inc, Alibaba.Com, AutoNation Inc,
Hendrick Automotive Group, Lithia Motor Inc, TrueCar Inc, Asbury Automotive
Group, CarMax Inc, Carvana Co., and Cox Automotive Inc, are some of the major
players in the United States Used Car Market.