Half Million New Car Shoppers Steered to Used Cars

Publish date: Feb. 26, 2009
Source: Automotive Body Repair News
File

Diamond Standard Brand Response from Geoff Crane,
Business Development Manager

Why should you use Diamond Standard or OEM safety parts? The article below describes a situation which can further increase the average age of the vehicle population resulting in the following:

1) Older vehicle age and diminishing values
2) Increased scrappage rates (currently est. 5.6%)
3) Increased total losses (currently est. 16.0%)
4) Increased repair cost threshold as vehicle owners rationalize expense vs. buying new vehicle
5) Downward pressure on premium cost given older/less valuable vehicle(s)

In a February 26, 2009 ABRN article on vehicle population aging, it was reported according to R. L. Polk & Co.'s Annual Vehicle Populaton Report (covering the July 1, 2007 - June 30, 2008 period), the median age of passenger cars increased to 9.4 years, breaking the previous two-year record of 9.2 years age.

The current environment, coupled with the higher gas prices of last spring/summer have resulted in consumers delaying the purchase of vehicles as discretionary income fell. The precipitous drop in new vehicle sales has continued through February 2009 with steering of sales to used cars further exacerbating the decline. With the uncertainty surrounding the economic outlook, tight credit continuing and low consumer confidence suggests what had been the sale of a new vehicle will continue to be steered to used.

In this period of higher material, part and repair costs, Diamond Standard Brand Safety parts represent the true alternative to OEM Safety parts at a substantial savings; thus helping to reduce repair costs and total losses. Please note some total losses may be attributable to use of substandard performing safety parts from some Offshore Aftermarket suppliers which have been been sold and distributed over the past 8 years. These substandard parts fail to perform to Federal levels of crashworthiness, the OEM standard, and Diamond Standard Alternative and can lead to increased damageability and potential occupant safety issues.

We believe Diamond Standard Brand Safety parts help reduce total losses, hold down repair costs and are a safe alternative to OEM parts. We advocate the use of Diamond Standard or OEM parts (bumpers, step bumpers, reinforcements, absorbers) as the best way to ensure the optimum results in the areas of safety and damageability.

Full Text of Article

At a time when automakers are desperate for every sale, a large number of shoppers are drifting out of the new car market and purchasing a used car instead. Edmunds.com has determined that approximately 511,000 used cars sold in the past three months would have been new car sales in a more normal economy.

Projecting ahead, this could represent a seasonally adjusted annual rate (SAAR) of more than 2 million vehicles, which equates to more than 15 percent of total new car sales. In manufacturing terms, that amounts to about two assembly plants' new car production, reports Edmunds' AutoObserver.com. This impacts collision repairers because used cars are on average worth less than news cars and are more likely to be total losses after they are damaged in wrecks.

“It is safe to assume that many shoppers who normally would be tempted by 'new car smell' and the latest automotive technology made a more cost-conscious decision because of economic pressures,” says David Tompkins, Edmunds.com senior analyst, whose team studied historical ratios of online research and actual sales of new cars versus used cars.

According to Tompkins, about two-thirds of incremental used car sales, about 343,000 cars, were sold to consumers who, in a normal market, would have considered a new car but instead began their shopping process with a used car focus. The remaining one-third, about 167,000 vehicles, were bought by people who demonstrated purchase intent for new vehicles, but, at some point in the buying process, switched to used cars.

“Right now, dealers need to maximize their short-term profitability more than ever,” says Edmunds.com CEO Jeremy Anwyl. “So it is really no surprise to learn that salespeople are directing some car buyers toward used cars, which have historically delivered a much higher profit margin to the dealer.”

Edmunds.com's research shows that recent model year used vehicles have been sold at a faster rate by franchise dealerships lately; in the past, vehicles that were one model year old made up about 11 percent of all dealership sales, but lately they have jumped to 16 percent.

What does this mean for the car buyer?

"Deciding whether to buy a new or used car is something that should be done after careful consideration, not while you are on your feet at the car lot," says Philip Reed, senior consumer advice editor. "It requires more research to successfully choose, negotiate and buy a used car. But it also offers significant savings for the savvy shopper.

Download News Release