Used-Vehicle Market Could Spell New Opportunity

SEMA News - June 2009
RESEARCH

Numbers Add Up to a Substantial Number of Specialty-Equipment Prospects

For the first quarter of the year, automotive industry analysts made pessimistic forecasts for new-vehicle sales volume for 2009. In February, J.D. Power and Associates predicted that total new-vehicle sales would reach a mere 10.4 million units—down 1 million units from the company’s forecast just a month prior and 6 million under the annual average during the past decade. And, in late March, R.L. Polk & Co. released results from a survey showing that 70% of consumers plan to purchase used vehicles as their next vehicle purchase. These same consumers also noted plans to retain their current vehicles more than half a year longer—56.3 months compared to 49 from responses collected six years earlier. In short, consumers are either holding on to the vehicles they currently own longer or, if they need to buy another vehicle, are planning to look toward the used market.


Table 1: Responses from the 2008 Automotive Lifestyles database revealed these popular used-vehicle choices.		Table 2: Used-vehicle owners held a heavier preference for performance parts upgrades. Power and warrenty issues aside, enthusiasts cited fuel economy as a motivator.

Enthusiast Buying Trends

SEMA is able to follow enthusiast trends via its Automotive Lifestyles Study—an intensive annual database that compiles data from active consumers in the hobby. Each year, subscribers to enthusiast magazines and members of popular automotive-focused communities are rigorously surveyed about personal automotive and specialty-equipment buying habits. On average, more than 3,000 enthusiasts have been surveyed each year. For the third consecutive year, the percentage of enthusiasts who said that they originally purchased their vehicles used has grown: 72% of enthusiasts drove used cars in 2008, up from 67% in 2007 and 54% in 2005.

Table 1 (above) shows the top 21 used vehicles purchased in 2008 by enthusiasts surveyed.

Used-vehicle buying enthusiasts continued spending after their initial purchase. For the 2008 survey, 93% of those who purchased a used vehicle within the previous 12-month period purchased specialty equipment for their vehicles, and 83% began purchasing within the first two months of ownership. Comparing those enthusiasts to new-vehicle buyers who purchased within the previous 12 month shows that used-vehicle buyers were more inclined to make performance upgrades.

Table 2 (above) shows the top 10 specialty-equipment purchases made by both used- and new-vehicle buyers. Notice that used-vehicle owners purchased more performance upgrades, such as air intake and exhaust upgrades, versus new-vehicle buyers, who purchased more accessories. Aside from the obvious desire for speed and power, one possible reason for some of the performance parts purchases by used-vehicle owners could involve a perceived need to improve fuel economy. Around 47% of used-vehicle owners noted that one reason they chose to purchase specialty equipment was to improve fuel economy. One thing to mention, however, is that this survey was conducted when regular gasoline averaged $3.74 a gallon.

More recent survey results still show that enthusiasts have purchased and plan to purchase used vehicles instead of new ones. In April of 2009, automotive enthusiasts were surveyed in order to find out whether their vehicle buying habits had changed as a result of the deepening economic downturn. About 32% said that they purchased a vehicle during the previous six months, and a majority of them (69%) said that they purchased a used vehicle. The top reason, by far, was the price of a used vehicle compared to a new one.

“I was able to afford an overall better, more reliable vehicle with 29,000 miles on it that I would not have been able to afford new,” wrote one enthusiast. Another said that, “Due to the economy and not being able to retire and work on my street-rod projects, I decided to purchase a C5 FRC Corvette so my wife and I can still enjoy some performance cruising this summer.”

Some enthusiasts are choosing to buy used vehicles with the purpose of accessorizing them. One enthusiast commented that there are many aftermarket parts already available, while another purchased a used vehicle to “trick out.” Over half (58%) of those who said that they purchased used vehicles indicated that they purchased specialty equipment for their vehicles this year. And of the 20% who said that they plan to purchase vehicles within the next six months, over half (58%) plan to buy used vehicles. Table 3 (below) shows which vehicle segment types were purchased over the last six months or were planned for purchase by enthusiasts who were or are in the market for a used vehicle.


Table 3: Large-, mid- and small-size SUVs have lost some appeal while large pickups gained promise. Many enthusiasts are simply unsure about their plans, possibly resulting from economic uncertainty.		Table 4: Even as new-vehicle sales drop, the reality is that more than 27 million fullsize pickups are registered in the United States—a large market not to be ignored.

What It All Means

With the economy being down during the latter part of 2008 and the first half of 2009, it probably comes as no surprise that consumers are buying used instead of new vehicles. So how do SEMA members benefit from this shift? One way is to understand what vehicles are currently on the roads today (i.e., where the potential opportunities exist). SEMA members now have access to U.S. vehicle registration data supplied by Experian Automotive, which details a composite view of vehicles that are currently registered and their location. For example, Table 4 (above) shows the top 10 fullsize pickups that were registered at the close of 2008. While this is merely a snapshot of just one vehicle type registered in the United States, the complete database is available for all vehicles, even at a state level.

If 2009 ends the way analysts have predicted, it will be one of the worst on record. Keep in mind, however, that even in just this single situation, a total of 27 million vehicles accounts for a healthy consumer base. Consumers are either holding on to their vehicles longer or are choosing to buy used vehicles at higher rates than in years past. SEMA members have tools at their disposal to help determine what enthusiasts are buying or plan to buy as well as determine where these future potential customers are located.

Enthusiast Top 10 Used Vehicles These vehicles represent a snapshot of the top vehicles owned by enthusiasts surveyed who purchased a used vehicle within the last year.

Ford F-Series Powerstroke Diesel		Chevrolet Camaro


Chevrolet Corvette		Ford F Series


Ford Mustang		Nissan 240SX


Chevrolet Camaro SS		Dodge Ram


Lexus SC300		Ford Pickup