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Used Car Options Expand at Dealerships

Benjamin Hunting
by Benjamin Hunting
November 8, 2010

With so much recent media focus on new car sales climbing out of the doldrums of the economic crisis, not much attention has been paid to used cars. It is perhaps not surprising to shoppers in the market for a secondhand car to find out that the used car market, as well as the buying habits of Americans in general, have both transformed over the past two years.

A recent study by R.L. Polk & Co. indicates that on average, most car and truck owners are keeping their vehicles for just over five years. This statistic applies to those who bought their vehicles brand new, and represents a 4.5 month jump compared to the results of the same study performed in 2009. Since 2008, when car companies around the world and in the U.S. in particular experienced a dramatic sales slowdown coupled with significant financial uncertainty, the average length of vehicle ownership has jumped by 14 percent - dramatically outpacing the 3.7 percent per year growth in average ownership length up until that time.

What does this mean for those in the market for a recent used car? In some parts of the country, it means that quality used cars and used trucks are in short supply, and as a result, dealerships have had to get creative in order to maintain traffic at their lots. According to an article published in the Automotive News, part of the new used car sales strategy has been the creation of dealer lots specifically designed to retail automobiles which only a few short years ago would have been relegated to auction.

Retail sales bring higher profits to dealerships than auction sales, but older automobiles - typically, those past the three and four year mark - have not offered profit margins appealing enough for these vehicles to command space in inventory. That has all changed over the past two years, with major automotive dealership groups now forming special business units to address a growing section of market not willing to plunk down the cash on a brand new car but still needing reliable transportation. In fact, vehicles as old as 10 to 13 years are now being stocked with increasing regularity on what are being termed 'value' outlets.

Automobiles in this age range were not too long ago the exclusive domain of private sale, but with dealerships now in the game slim profits are being squeezed out of sticker prices that are in some cases below $1,000. On average, 'value' lot inventory sells for $7,800 per automobile, with some dealerships offering limited guarantees and other perks to help move the older vehicles. Other dealerships rely on after-sales service to help boost the bottom line as customers return to have their cars repaired or to have maintenance performed by teams of in-house mechanics and technicians - often the same employees charged with reconditioning older used cars for sale in the first place.

If you are in the market for an affordable used car but have avoided dealerships due to past pricing policies, now is a good time to at least investigate what might be sitting on your local car dealer lots. The low-end used car market has received a boost from national dealership networks, which gives you yet another option when it comes to finding a vehicle that fits your budget.


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