Hybrids – Vehicles, Battery & Hydraulic Technology

2010 Trends: Used-Car Prices Up, Incentives Down

December 30, 2010

2010 was another year of ups and downs for the auto industry. Edmunds.com reflects on the year, noting the key trends.

Trucks and midsize cars sold better than compacts and hybrids

While new-car sales are trending upward - with expected 2010 sales of 1,127,000 - some segments are doing better than others. Stable gas prices mean that consumers - and especially those who had been putting off their vehicle purchases during the recession - have been more willing to buy trucks and SUVs. As a result, truck sales are expected to be up 14.9 percent and SUV sales are up 21.3 percent over last year. Midsize car sales are expected to be up 7.8 percent over last year. Hybrid sales are down 8.1 percent and compact car sales are up just 1.1 percent.

"Many of the new trucks and SUVs were bought to be used as work vehicles by contractors and others who had delayed their purchases waiting for the economy to improve. The midsize car segment also was a big winner this year since it had impressive new products and captured the relatively conservative mood of car-buyers," stated Edmunds.com Senior Analyst Michelle Krebs. "Hybrids and compact cars, on the other hand, weren't such strong sellers. There weren't many new players in the compact car segment to draw in attention and, because of the economy, many traditional compact car buyers likely bought used cars if they bought anything at all."

Most automakers reduced incentives, except for Japanese brands

Edmunds.com True Cost of Incentives data showed that incentives fell for domestic, European and Korean brands compared to 2009, but Japanese automakers increased their incentives this year. While Japanese brands remained the lowest in average incentive spending with $1,968 per car sold this year, it was still a notable increase from the $1,637 spent per car last year. U.S. makes averaged $3,333 in incentives per car sold versus $3,766 in 2009, while Korean brands averaged $1,820, down from $2,721 last year. The European makes had the greatest decline in incentives, averaging $2,491 in spending per car, down from $3,295 in 2009.

Used-car prices up thanks to high demand caused by "substitution effect"

The average used-car transaction price is at $19,345 currently, versus $16,586 in December 2009. All year long used cars were generally 10 to 15 percent higher than last year. Due to the economic downturn, car shoppers that had traditionally been new-car buyers ultimately bought used.

"Consumers have been willing to either substitute premium for non-premium cars or consider used and certified pre-owned cars instead of new," said Edmunds.com Senior Analyst Karl Brauer. "Ironically, thanks to reduced supply and increased demand, today many lightly used pre-owned cars are actually more expensive than new cars. But, because that is counterintuitive, many used-car shoppers aren't even considering a new car."

The supply of used cars is limited, though, so Edmunds.com analysts expect 2010 used-car sales to be up by 3.7 percent compared to last year - while new-car sales are up 11.6 percent.

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