Used car sales rise as leases expire

By CARL STODDARD
Capital News Service

LANSING — Sales of used cars and trucks in Michigan are rising, thanks in part to more vehicles coming off leases.

For the past five years, sales of used vehicles in the state have been speeding up and still show no signs of slowing, said Terry Burns, executive vice president of the Michigan Automobile Dealers Association, which is based in East Lansing and represents more than 650 new-vehicle dealerships.

Unlike in some other states, in Michigan sales of new and used vehicles tend to be strong and less cyclical because of the state’s long-standing ties to the auto industry, Burns said.

“We’re the auto capital,” he said. “People like cars. People understand cars.”

People in Michigan have been buying more used vehicles as more cars and light trucks come off leases, he said, a trend that started around 2013.

Leasing was a popular option for new-car seekers until 2007 or 2008 when the nation  plunged into a recession, he said.

“Leasing was just about nonexistent” in those difficult financial times, he said. “Banks were under extreme scrutiny. The banking decision was to cut down on leasing at that time.”

But as the recession eased, starting around 2012 or 2013, banks became more willing to offer automobile leases and leasing once again became a popular option, he said.

Now, those leased vehicles are coming back to dealerships and are available  for sale as used vehicles.

“It creates a little bit of a cycle. That’s why you’re seeing more used cars on the market,” Burns said.

When it comes to auto sales, he said, Michigan is a little different than the rest of the country.

“We don’t have the real highs and lows in sales,” he said. “We don’t normally follow the U.S. averages. We’re never seeing extreme swings.”

At the Fernelius dealership in Cheboygan, used vehicle sales are strong, said Travis Vizina, the pre-owned sales manager.

“We’re having a good year. August was a record month,” said Vizina, whose dealership sells Toyota, Chrysler, Dodge, Jeep and Ram vehicles.

He said used vehicle sales tend to be “a little bit of everything.” The dealership sells cars coming off leases, as well as other used newer and older model vehicles, and the mix includes cars, trucks and sport-utility vehicles, he said.

Sales of used cars have been on the rise at the Serra Traverse City dealership, said Jerry Zezulka, its executive manager.

The dealership, which sells seven new-car brands, was acquired by the Serra Automotive group, headquartered in Grand Blanc, in 2015. It has seen used car and light truck sales increase since that time, he said.

“There’s a need for used cars,” he said, and many of the used cars and trucks the dealership sells were previously leased.

In Sault Ste. Marie, vehicles coming off leases are popular with buyers as well, said Craig Stump, used car sales manager at Rodenroth Motors Inc., a Buick, Chevrolet and GMC dealer.

“We’re in north country, so we sell of lot of SUVs,” Stump said.

Four-wheel-drive pickups also are popular and expected to be even more in demand as winter approaches, he said.

But while sales of used cars are up around the state, the number of used car dealers is not.

“There has not been any real increase or dramatic change in the number of used vehicle dealer licenses” in Michigan, said Fred Woodhams, the communications director for the Michigan Secretary of State.

“In fact, over the past five years, there’s been a small decrease.”

Currently there are 3,615 licensed used vehicle dealers in the state, down from  3,914 in 2012, Woodhams said.

The number of new car dealers in the state also is falling. There are 1,229 new car dealers, down from 1,304 in 2012, according to the Secretary of State.

Manheim Inc., an auto auction company based in Atlanta, said used vehicle sales at franchised U.S. dealerships last year rose for a seventh year in a row.

“We are now at that point in the automotive cycle where percentage gains in used vehicle sales start to exceed those of new vehicles,” Manheim said on its website. “That’s what happened in 2016, and it will likely occur again in 2017.”

Nationwide, dealers are benefiting as more cars and truck come off leases, “which means that quality used vehicle inventory will literally be driven to their door,” Manheim said.

Edmunds.com, an online resource for automotive information, reported that used vehicle sales in the U.S. hit 38.5 million last year, up 0.6 percent from 2015.

Prices of used vehicles also rose last year, Edmunds said. In 2016, the average retail price for a used vehicle was a record $19,183, up 3.4 percent from the previous year.

“Financing was one place consumers found relief from higher prices. Interest rates were at a record low, coupled with slightly longer loan terms,” Edmunds said.

New vehicle sales in the U.S. rose to a record 17.5 million last year, up slightly from the previous year, according to J.D. Power and Associates, a marketing information services company.