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BUSINESS Thursday 30 January 2020
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Buyers move to used vehicles as new autos hit record prices

By TOM KRISHER es, fees and automaker
AP Auto Writer incentives, hit a record of
DETROIT (AP) — The aver- $39,028 last November,
age sale price of a new according to Cox. But as
vehicle hit a record of just demand from individual
over $39,000 late last year, buyers ebbed in Decem-
a figure that chased many ber, dealer discounts grew
buyers out of the market to 7% of the sticker price,
and into used vehicles, the highest level since the
which could set a sales re- financial crisis in July of
cord. 2009. That drove the aver-
The shift to used, aided by age price down slightly to
millions of late-model ve- $38,948, according to Cox.
hicles coming off two- and Richard Bazzy, owner of
three-year leases, is good three Pittsburgh-area Ford
for consumers who can get dealerships, said automak-
well-equipped cars, trucks ers like Ford are going to
and SUVs for far less than have to keep up low inter-
new ones. But it could be est loans and cash offers
bad for automakers, with to keep new vehicle sales
many industry analysts ex- In this June 26, 2018, file photograph, a used 2017 Chevrolet Cruze sits in a row of other used, late- strong.
pecting new-vehicle sales model sedans at a dealership in Centennial, Colo. Still, there are forces work-
to fall in 2020. Associated Press ing against lower new-
Consumers bought an es- six years, would bring a cost $20,533. A 3-year-old have afforded a new car vehicle prices. People are
timated 40.4 million used monthly payment of just one cost an average of but knew she shouldn't still buying SUVs and trucks,
vehicles last year, likely over $600. $22,571. Borrowing $20,000 spend more than $30,000 which accounted for 69%
passing the old record of Since many lenders limit for six years would cost an while trying to recover from of U.S. sales last year. Trucks
40.2 million set in 2018, ac- auto buyers to a payment average buyer about a financial problems. She and SUVs generally are
cording to figures from the of 15% of their income, the $340 monthly payment. decided in early January more expensive than cars,
Edmunds.com auto pricing lowest-income buyer who Price isn't the only reason to buy a silver 2016 Toyota so that drives up the aver-
site. Edmunds, which pro- could afford the average buying used is becoming Corolla with 25,000 miles on age sale price.
vides content to The Asso- price would have to make more attractive. Automak- it from Carvana for about Also, people still want the
ciated Press, won't call it a over $48,000 per year, said ers, dealers and sites like $15,000. latest safety and infotain-
record until final numbers Matt Dundas, finance di- Carvana offer used ve- "I'm going to look for some- ment technology, says
arrive sometime in mid- rector for Carvana, an hicles with warranties and thing that's lower but still a Chesbrough, and they are
February. online used-vehicle sales maintenance records, reliable vehicle," she said. "I willing to spend to get it.
At the same time, new-ve- company. sometimes calling them wasn't really in a position to Automakers are differen-
hicle sales dropped 1.3% to "That's approaching the "certified pre-owned." be super-picky. Maybe I'll tiating their new vehicles
just over 17 million last year, U.S. median household in- "I think we're making it not get what I want next time." from even 2-year-old ones
and some industry analysts come of just over $60,000, as scary to buy a used car," As demand falls, the in- by adding more driver as-
are predicting they'll fall and even then, you're still Dundas said. "It's in great dustry could be forced to sist and safety features as
into the mid-16 millions this right up against lender shape, it's clean and I'm increase incentives such well as bigger navigation
year. limits," Dundas said. "Ide- dealing with a legitimate as cash rebates and low- screens and other technol-
"This affordability issue is ally the average per- company," he said. interest financing, and ul- ogy, he said.
sort of scaring consumers son wouldn't be right up A record 2.8 million certi- timately that could bring "All of that is going to force
away" from new vehicles, against the line," he said. fied pre-owned vehicles new vehicle prices down. these vehicle prices to con-
said Charlie Chesbrough, The lower prices make were sold last year, ac- The average new vehicle tinue to creep up," Ches-
senior economist at Cox late-model used vehicles cording to Cox. sales price, including tax- brough said.q
Automotive, which in- more attractive. Last year, Aundrya Richardson, an
cludes Kelley Blue Book. Edmunds estimated the emergency dispatcher in
"You have this sort of com- average used vehicle the Atlanta area, could
petition out there of used
vehicles that is offering an
alternative to people who
are looking for value."
Chesbrough expects new-
vehicle sales to fall to 16.6
million this year, while Stan-
dard & Poors analyst Nishit
Madlani predicts 16.4 mil-
lion "amid a wave of used
autos hitting the market
and high sticker prices on
new cars." S&P sees a fur-
ther decline to 16.3 million
for the following two years.
If a buyer with good credit
bought an average new
vehicle for $39,000 and put
$2,000 down, they would
borrow $37,000. That sum,
at about 6% interest for