For the first time in recent history, some vehicles have appreciated in value or depreciated less than expected, finds a recent iSeeCars study.
iSeeCars cites high demand and tight vehicle supply with turning some vehicles into appreciating assets or for depreciating slower than expected.
“This is unprecedented in used-vehicle pricing,” Karl Brauer, executive analyst at iSeeCars, told Wards Auto. “Finding multiple three-year-old used models worth more than their new MSRP is something we’ve not seen before.”
This fact will help dealers who hope to still churn a profit amid tightened new vehicle inventories.
A recent Wards Intelligence survey found almost half (42.5%) of all respondents expect used-vehicle sales to increase their dealerships’ revenues in the next 12 months. In contrast, just 34.4% of respondents expect new-car sales to increase revenue.
The majority (58.8%) of survey respondents reported inventory shortages had the greatest negative impact on their businesses in the past 12 months. Over half (53.2%) said inventory shortages will have the greatest negative impact on their stores in the next 12 months.
Higher used values may not make up the revenue shortfall, but they can make up for some profits lost because of inventory challenges. Dealers can expect sizable profits from selling appreciating vehicle models.
Slower depreciation also may open new opportunities for profitable acquisitions.
Brauer predicts depreciation will continue to drop in a recent interview with Wards. He noted that depreciation after three years is normally 35%, but in 2021 it was 23% and in 2022 is 16.9%. Now, he said there are “cars that are worth more when they are three years old than they were new.”
The iSeeCars report shows three of the models that increased in value over MSRP are the same as the top three models with the lowest five-year depreciation: the Porsche 911, Jeep Wrangler and Jeep Wrangler Unlimited. Other models include the Porsche 718 Cayman and the Toyota RAV4 Hybrid.
Brauer says if dealers can acquire any of these vehicles for a decent price, they will do well when they sell them. F&I, parts and accessory sales also will add to dealership profits, he said.