Report Description

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 and institutional.

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 warranty.

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 price.

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.

Market Opportunities

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.

Market Segmentation

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.

Company Profiles

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.