Insight

TEMPLATE: InBrief Article

The US automotive industry has been enjoying some of its best years ever. However, our latest forecast predicts new-vehicle sales will likely drop meaningfully in 2018 and by more than 2 million units by 2019 versus 2016. One big reason? Increased used-vehicle sales will likely deflate the market.

At A Glance

  1. New-vehicle sales are likely already past peak.
  2. Years of high used-car prices following the recession sowed the seeds for a coming dip in new-car prices.
  3. Automakers need to make courageous decisions now to prepare for the coming sales decline.

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So when might the wheels come off? in fact, this virtuous cycle of the past several years has already started to unravel. Today's record new vehicle sales - couples with recent higher vehicle leasing penetrations - are conspiring to put as many as 800,000 more used vehicles on the market this year versus last year.  That number is set to grow higher in 2017 and 2018.

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$3,690

In September 2016, incentives increased to $3,690 per vehicle

FIGURE 2: Used vehicle value index, 2008 to 2016

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It's likely that a combination of factors will lead to lower prices in the used-vehicle market, which will then pull sales from the new-vehicle market - in addition to hurting the residuals of new leases and driving up consumers' lease costs.

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Like it or not, players up and down the automotive chain are about to witness the effects of the changing used-vehicle market.  HOw can industry players get traction on the road ahead? They can start by asking the right questions.

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56% of sales in 2Q 2016

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