The age-old jokes about used-car salesmen in double-knit suits may persist, but stigmas once associated with buying a second-hand vehicle are disappearing.
Time was that used cars and trucks were for students and other first-time buyers, for those who couldn’t afford a new car later in life and for the adventuresome.
Recent statistics from CNW Marketing Research Inc., in Bandon, Ore., offer some surprises. For example, in 1980 the average age of a used-car buyer was 23, slightly more than one-half were men, their incomes averaged $15,208 and 10 percent bought from new-car dealerships.
Fast-forward to 2000, and CNW reports the average age of a used-car buyer has climbed to 29, more women than men bought used, $21,244 was the average income and 16 percent of sales were through new-car dealers.
“Affordability is the key” to used-car sales, said Art Spinella of CNW. “Today there are greater numbers of newer used vehicles–those coming off lease, for example. They are a good alternative to buying new, especially when it comes to price.”
Spinella said the average price of a used car at a new car dealership is around $12,000, compared with about $21,000 for a new car. “That’s like a $300-a-month payment versus $600,” Spinella said.
Throw in certified vehicles, and there’s another reason people are buying used. These are relatively late-model cars and trucks that, if they pass rigid multipoint inspections, get a warranty.
In addition to certified used vehicles with their warranties, millions of vehicles come off lease each year. Some are only a year old, and many are still under factory warranty. The idea of factory protection makes them more attractive to used car shoppers, especially those who have not bought used before.
In 2000, new-car dealers sold 12.3 million used cars and light trucks. They sold more than 17 million new vehicles. A year earlier, dealers delivered 12.5 million used and just less than 17 million new vehicles. “What are consumers willing to spend to buy a certified vehicle?” said Spinella. “It depends on the market segment. The added premium on budget cars has fallen from $380 in 1997 to less than $293 in 2000.”
Premiums on luxury vehicles, upper mid-range vehicles and full-size pickups and sport-utilities have been growing, he said. In the case of luxury cars, consumers have been willing to pay an average of more than $2,000 per vehicle for certification.
“Certified sales are growing more each year,” said John Carnivele, used-car manager at Oak Lawn Toyota. “We’ve offered them for about four years. I’d say now they are 50 percent of our business.”
Someone looking at a new Corolla who spots a factory-certified Camry is likely to be interested, he said. There is 6.9 percent financing on these vehicles for buyers who qualify, he said.
Carnivele said that the average loan rate for new cars is higher than the 6.9 percent available to some buyers of certified Toyota used cars.
“With a one-year-old certified car you might get a 6-year/100,000-mile warranty compared with a 3-year/36,000-mile warranty on a new car,” Carnivele said.
Carnivele said a 2000 model year certified Camry may be priced at $17,000 compared with $21,000 for a new Camry LE. A ’98 (certified) Corolla LE is priced at $9,000 versus a 2001 at $15,500.
“Still, it is hard to convert to used someone who always buys new,” Carnivele added.
Peter Salinas, managing editor of Used Car News, an industry trade paper published twice a month in the Detroit suburb of St. Clair Shores, said lending institutions use various wholesale guildes (N.A.D.A. Guide is one and the various blue books also contain such) to determine values and will make car loans to customers who qualify for them based on those values. Used cars over a certain age or odometer reading may not qualify for financing, but there are thousands of independent used car dealers who usually provide loans for 12 to 18 months.
New car dealers may offer used car financing through the factory captive finance operation (GMAC, Ford Motor Credit, Toyota Credit, etc.). They frequently can help used-car buyers who have no credit rating or a poor credit rating with higher interest subprime loans from lending institutions.
Certified vehicles have turned wannabe owners into members of the Mercedes-Benz family, said Ray Dupell, department manager of pre-owned marketing.
“We first offered the StarMark [certification] program in 1998,” he said. “Our studies show that 30 percent of StarMark customers were looking at new competitive products.”
The vehicles let more expensive Mercedes be a part of the near-luxury market, he said. Dupell says that the E-Class, for example, which starts at $47,745, can run around $35,000 used.
“To qualify for certification, a pre-owned Mercedes must be no more than eight model years old with no more than 90,000 miles on it and have no frame damage,” he said.
Dealer StarMark sales numbered 8,000 in 1998. They tripled to 24,000 in 1999 and grew another 27 percent to 30,321 in 2000, he said.
E-Class models have been the most popular in the StarMark program, he said. And pre-owned vehicle buyers show “a high intention to stay with the brand.”
The Used Car News 2000 Data Source Book shows that in 1999 the used car departments of new car dealerships sold 16.3 million cars. Independent used-car dealers sold 14.3 million units, and private sales numbered 10.3 million. At the beginning of the decade, new-car dealers sold 14.2 million used cars, independents delivered 10.7 million and private sales totaled 12.6 million.
“State independent dealer associations are encouraging education for their dealer members,” Salinas said.
“And independent dealers, whether they are selling more expensive late-model cars or offer buy-here-pay-here financing and sell the cheapest vehicles, all depend on repeat business,” Salinas said.
Statistics show that curbside or private sales are dropping, Salinas said. “There is a proliferation of late-model, off-lease vehicles available today,” he said. “Certified vehicles with their warranties give buyers more confidence, more peace of mind.”
Purchasing from a private owner tends to mean a lower price and immediate possession. But the “buyer beware” rule is always in effect, Salinas said.
“Today more people are researching vehicles on the Internet so they understand the market,” he said. “The Internet also provides leads on where to buy.”
Salinas said Autotrader.com is the largest Internet consumer site for used cars. Cars.com is another electronic venue for people shopping new or used. It offers to help the visitor determine whether to buy used or new with a series of questions.
USED CAR SALES BY THE NUMBERS
According to Used Car News:
– In 1999, the latest year for which figures are available, most used-car prices were $10,001 to $13,000, followed closely by sales of vehicles priced $7,001 to $10,000. Together they accounted for more than half the market. Cars less than $4,000 accounted for 2.3 percent of sales; $4,001 to $7,000 were 14.2 percent; $13,001 to $16,000 were 17 percent; and vehicles more than $16,000 were 13.3 percent of the total.
– In 1999, used-car sales totaled 40.9 million. Slightly less than 17 million new cars were sold.
– The National Automobile Dealer Association reports that in 1999 franchised dealers got nearly two-thirds (62 percent) of the used cars they sold from customer trade-ins. They purchased the rest from auctions. In the early 1980s, dealers bought 10 percent of their vehicles from the auctions. “The auctions have really cleaned up their acts,” said Used Car News managing editor Peter Salinas.
He cites greater professionalism in the auction industry as well as in the used-car industry as a whole.
“These improvements have been going on for 15 years or more,” Salinas said. “There has been state legislation affecting odometer fraud. And as the manufacturers have brought vehicles to the auctions in greater numbers [especially off-lease vehicles], titling and financing procedures have improved,” he said.
— Jenny King
