Automotive Salvage Market Outlook 2017
Looking at the numbers in the used car and related industries, we can get a fairly clear picture of what to expect in the coming years. Good news–it’s not a bad picture.
As 2007’s recession lifted and buyers began to feel more financially confident, used vehicle sales have risen and continue to rise. However, gross margins–the percentage of profits remaining after the vehicle is sold–have seen nothing but decline. Sales are up, but profits are down. How can this be? The answer is a competitive industry. The market is changing, and dealers need to keep up.
Based on the data, we expect the prices of clear titles to fall. When prices of clear titles fall, so do those of rebuilt salvage titles. In the years to come, quality will be very important because consumers will easily be able switch over to clear titles. Because gas prices are currently low, so are the demand for and prices of electric vehicles, as well. Competition in this area is low, however, leading to higher prices and quicker sales.
In 2015 and 2016, the slowing down of the Chinese manufacturing market contributed to dropping scrap metal prices, which in turn lead to lower total loss vehicle prices. At the same time, prices for lightly- to moderately-damaged vehicles increased. The demand for used vehicles is expected to remain steady through 2017, although prices will drop.
Who’s dealing all of these salvage vehicles? Small dealers who frequently buy and sell clear title vehicles below market value continue to show an interest in salvage vehicles due to their low prices. International buyers, too, have been playing a key role in the US market. Fluctuations in currency value contribute greatly to these buyers’ patterns; however, most international buyers still prefer to deal in new vehicles.
The primary target markets for salvage vehicles are Generation Y and parents with children over the age of sixteen. Generation Y, or those born between 1980 and 2000, are young and looking for the most bang for their buck; parents want a safe but inexpensive vehicle for their children, who might damage the car as they learn to drive.
In summary, prices on rebuilt salvage vehicles are dropping, while demand for such remains steady and competition in the market grows. It seems that the name of the game for 2017 will be quality, not quantity.