Polk Research: Used-Car Market Grows Nearly 5 Percent Annually
28 August 1998
Used-Vehicle Market Continues Growth: Polk Research Shows Used-Car Market Growing Nearly Five Percent Annually; Prospects for Continued Growth are Strong DETROIT, Aug. 27 -- For the third consecutive year the number
of used-vehicle transactions in the United States has shown steady growth,
according to findings released today by The Polk Company. In 1997, nearly 37
million used vehicles traded hands in the United States, a 4.6 percent
increase from the previous year.
Since 1994, virtually all of the growth in the market (a subject of vital
interest to carmakers and retailers) has been on the used-vehicle market side.
According to Polk data, the used-vehicle market has grown from 32.07 million
units in 1994 to 36.79 million last calendar year, an average of 4.7 percent
annual growth over the period. New-vehicle registrations, on the other hand,
were stagnant over the same period. The chart below details new- and used-car
growth for car and light truck registrations since 1994.
TRANSACTION VOLUME (Millions)
Year New Used Total
1994 14.95 32.07 47.02
1995 14.87 33.77 48.64
1996 15.14 35.16 50.30
1997 15.06 36.79 51.85
Source: Polk
"The record number of vehicles on the road and their increasing
reliability and durability have certainly contributed to market growth," said
Richard Spitzer, director of industry analysis for Polk. "These factors
remain very positive for the used-car market."
Polk, who tracks the automotive industry and provides analytic services,
introduced its used-vehicle database in 1996 and unveiled a methodology to
determine used-car market size. The database (based on Polk's census of
vehicle registrations) and methodology resulted in a widely accepted benchmark
of used car market size.
"The increased used-vehicle activity in light of stable new-vehicle sales
suggests that consumers are taking advantage of attractive new-vehicle pricing
to trade up, which, in turn, causes a ripple effect throughout the used car
market," said Spitzer.
Largely, this is the result of a strong economy and aggressive marketing
efforts by automobile manufacturers: Leasing popularity has grown
significantly in recent years, and, as a result, more high-quality, late-model
used vehicles are available in the marketplace.
Polk data shows the influx of two- and three-year-old vehicles has
dramatically affected the point at which people trade a vehicle. Two-to-three
year-old vehicles' share of the used-car market increased from 12.1% in 1995
to 14.6% in 1997. At the same time, the share of market represented by four-
to seven-year-old vehicles declined from 23.6% to 20.9%. This suggests that
the increasing supply of late-model, low-mileage vehicles has resulted in
consumers buying newer vehicles and keeping them longer -- the used-car market
share of vehicles aged four to 10 years old traded has dropped, while there
has been a concurrent increase in the share represented by vehicles 11 to 14
years old:
1995 1996 1997 Differential
Total Used (Millions) 33.77 35.16 36.79 9.0%
Age 2-3 12.1% 13.2% 14.6% 20.2%
Age 4-7 23.6% 22.1% 20.9% -11.1%
Age 8-10 21.1% 21.0% 20.0% -5.2%
Age 11-14 15.9% 17.8% 20.3% 27.3%
Source: Polk
The growing used-car market can also be attributed to an increasing
trading rate. Polk compared used-vehicle transaction volume against the total
number of vehicles on the road (passenger cars and light trucks) to determine
"turnover rate" -- the portion changing hands in a given year. Turnover of
all vehicles in operation has increased steadily from 17.6 percent in 1994 to
19.1 percent in 1997. Should the observed trend continue, it bodes well for
the used-car market. If the turnover rate continues to rise as it has the
last three years, the combination of more vehicles on the road and faster
turnover will result in a projected used-car market growth of more than 1.5
million transactions per year between 1998 and 2000.
YEAR VIO TURNOVER USED (EST) MKT. GROWTH
1994 182,328 17.6% 32.07 -
1995 186,701 18.1% 33.77 1.70
1996 191,134 18.4% 35.16 1.39
1997 193,091 19.1% 36.79 1.63
1998* 196,072 19.5% 38.31 1.52
1999* 199,039 20.0% 39.87 1.55
2000* 201,789 20.5% 41.40 1.54
Note: All numbers in millions
VIO includes cars and light trucks
* represent trend projections
Source: Polk
Polk provides multi-dimensional intelligence information solutions to
companies as a statistician for the motor vehicle industry; as a direct-
marketing resource; as a supplier of demographic and lifestyle data and
database-marketing services; as a publisher of city directories; and as a data
enabler for geographic information systems. Polk is a privately held firm
with facilities around the world, including the United States, Canada,
England, Germany, and Costa Rica.
