Looking Back: Top Three 2017 Automotive Predictions
By Rob Christman
Every year we see bold predictions on the auto industry. And at the end of the year, these predictions come and go with no accountability. I hold myself to higher standards, so I’m posting my predictions for 2017; that I originally posted on January 13th in this space.
As you can see below, I unarguably hit on two of the three. I can make a case that I hit on three of three as the first prediction is accurate if I hadn’t used the word “soar”. Used vehicle sales were (are) up for 2017, mainly riding the strength of light trucks, cross overs and… CPO sales! And for bonus points, I did call for 2017 to be an interesting year; and that it has!
What are your thoughts to 2017? What predictions do you have for 2018 (I will publish my 2018 predictions in several weeks – Hint: Independent Dealerships and CPO are two of the 2018 predictions)). What are your comments to my predictions from a year ago?
Wishing you a happy, healthy and prosperous New Year!
1- Used Car Sales will to continue to soar. With the rising amount of people not participating in the labor pool and the continued uncertainty of the American economy, Pre-owned vehicles will be an even more attractive option to many of today’s consumers. According to the Bureau of Labor Statistics, the U.S. Labor pool has shown the highest amount of people currently not working. That puts a huge limitation on free cash flow and tightens the budget of a major portion of the car buying public.
This makes a used vehicle a highly attractive option!
2- Off-lease volumes are high and will continue to rise. Dealers and the OE’s will have to focus on how to turn these vehicles quickly and keep residuals up. Keeping units in inventory down and prices up will be a challenge to dealers and the factories alike.
As Bloomberg recently pointed out, strong used car pricing is a critical component required to prop up the overall auto market. While American's love their brand new cars, if used car prices become too soft then substitution can hurt new car sales. Add to that the impact of falling residual values on the finance arms of the auto OEMs and you have all the ingredients required for an auto market meltdown.
Updated used car strategies, processes and use of technologies will steer improvement in the used vehicle market in 2017.
3- A lot of opportunity with CPO. Even with uncertainty of the economy, consumers still want more technology in their cars, they want a safe vehicle and the want the security of a warranty to back up their purchase. The increase in Off-lease vehicles creates an opportunity to provide consumers with the options for CPO vehicles. I see yet another record setting year for CPO sales in 2017.
Increased availability of two- and three-year-old models with modern safety and technological features should pull more interest into the CPO category. Adding a safety inspection and repairs to bring these vehicles to like new can drive consumer confidence in these vehicles and differentiate them from the non warranty backed used car.
With these predictions made, remember that of all the factors driving vehicle sales, the two biggest are obvious: cheap money and cheap gas. As long as both of these factors stay down, consumers will stay optimistic and continue to upgrade their current vehicles. Keep a close eye on oil prices creeping up and the rates at the Federal Reserve. If both of those factors rise, we will be forced to be better, more efficient and find new ways to reach the hearts and minds of consumers.
All in all, 2017 will prove to be an interesting year and I am personally very bullish on the used car market to continue it’s profitable run.