CARMEL, Ind. — The first half of 2018 has been a strong year for used vehicle values, and a growth in upstream remarketing is playing a helpful role.
Various factors had market analysts predicting that used vehicle values would suffer in 2018 — one of the largest factors being the expected off-lease tidal wave that would bring a surge in supply of three-year-old vehicles. The tidal wave hit, but the market has so far able to absorb the extra supply. Tom Kontos, chief economist for KAR Auction Services, believes upstream remarketing is the reason.
“We were really thinking there would be more impact due to supply growth this year. The remarketing industry itself has done a really good job of spreading the volume into various channels,” said Kontos. “Cars that used to end up at auctions are being sold upstream at the grounding dealers. Off-lease units don’t make it to auction; they get sold right at the turning point.”
Kontos expects the rise in upstream remarketing to continue, which is good news for used-vehicle values as more off-lease units return to market in the next two years.
Depreciation through the first half of 2018 stands at 13.7%, which is much lower than the 16.3% rate recorded one year ago. According to Kontos, that means used-vehicle values are performing about 3% better this year than they were in the first half of 2017.
The way things have played out has surprised Anil Goyal, executive vice president of operations for Black Book. He predicted that depreciation would be higher this year. The executive agrees that growth in upstream remarketing has helped, but he believes the ride-sharing business has helped as well.
Used vehicles make ideal vehicles for drivers in the ride-sharing environment due to their lower acquisition costs and availability, he noted.
As the ride-sharing business continues to grow, it’ll be another factor helping used-vehicle values stay in line as supply continues to grow, as more drivers in the business segment will mean more demand for the extra supply.