UCN
Used Car News
usedcarnews
1/13/2020
Industry Economists Forecast Strong 2020
karglobal.com
By Jeffrey Bellant
IN THIS ISSUE: • NIADA Forecast • Plane Crash
Rush - Dated Material
•Tony Moorby
Industry economists see a strong 2020, with steady volumes and available credit, but also with a changing mix of vehicles and challenges to growth. “It’s been a good run for used sales at auctions,” said Tom Kontos, chief economist for KAR Global. “Used car sales are still good and the demand is still there. Volumes will still be strong in 2020.” Jonathan Smoke, Cox Automotive chief economist, said 2020 should be good for used-car dealers. “The retail used market will continue to benefit from the credit and affordability trends that are causing the modest declines in the new market,” Smoke said. “Dealers should see similar to slightly higher volumes as a result of used sales growing to more than offset the decline in new.” For consignors, prices overall are trending down, Kontos said. “You’ll get variations in that, but that’s overall,” he said. Certified sales were strong in 2019, which helped absorb the additional off-lease volume. Prices will unlikely maintain their
highs in the coming year, but that is misleading, Kontos said. “Volumes should be at or near the highs achieved these last couple of years,” Kontos said. “I think we’re at a plateau.” Smoke agreed. “The auto market should be resilient in 2020, but it isn’t likely to grow,” he said. “We are expecting another modest decline in new vehicle sales as the retail market softens, but fleet no longer grows to offset the decline.” Kontos sees an increase in commercial fleet and rentals or they’ll at least maintain their levels. “Where we do expect a drop is in dealer consignment levels,” Kontos said. Smoke said this is still “high tide” for wholesale volumes, even without growth. “Lease maturities are expected to be flat but at record-high levels,” he said. “We expect that repossessions will be up due to record loan volumes and a higher severe delinquency trend in 2019. “In aggregate, the wholesale market will remain at record levels and supportive of a robust retail used vehicle market.”
Kontos agreed there may be more repos in the market, but it’s not because a bigger percentage of people are defaulting. “It’s that there are lot more cars out there,” Kontos said. “Even at similar default rates as (2019), there’s more paper outstanding so we’ll see more repo volume.” Smoke added that credit availability is key to 2020 success. “The biggest single factor impacting demand for auto will be credit trends,” Smoke said. “We are assuming stable rates with the Fed keeping rate policy parked.” Again, that’s good news for independents, Smoke said. “Credit should remain available but favoring the used market as lenders continue to seek higher rate spreads on higher risk consumers,” he said. “If credit conditions ease, that could favor retail new, and volumes there could be stronger or at least more stable year-over-year.” Kontos said the older lower-dollar cars are becoming easier to get as new-car sales have been high over the past five years. Smoke said the higher volume
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