Red Hot Clear the Lot!!!

Used-car confidence Quality, pricing boosts pre-owned vehicle sales

Chris Taylor spends so much time hunting for vehicles at weekly auctions in Toronto, the Windsor used-car dealer now has a condo in Hogtown.

"Half of my life is down in Toronto," said Taylor, owner of Automaxx Pre-owned Car Center.

Business has been brisk. Since Taylor purchased Automaxx almost four years ago, sales have steadily risen, recovering completely from the downturn that rocked the auto industry two years ago. Bolstered by a sales increase last year of more than 20 per cent over 2009, Taylor opened a second Automaxx store in the city.

"People are more confident now than they were two years ago; there's no question," he said, adding that he expects sales growth this year to at least mirror that of 2010.

Taylor's confidence in the used-car market reflects a cross-country trend. Last year, demand for used cars helped fuel a record-setting level of vehicle purchases, said Dennis DesRosiers, a Toronto-based analyst. Canadians purchased 4.44 million new and used vehicles in 2010 -- an increase of 4.6 per cent over 2009. While sales of new vehicles rose 6.6 per cent to 1.557 million units, demand for used cars was up 3.6 per cent to 2.89 million units.

"There is a slow but sure move to more used product," said DesRosiers. "In the year 2000, used represented 56.6 per cent of the market and now represents 65 per cent of the market."

Competitive pricing and rising quality are steering consumers toward used vehicles, explained DesRosiers. The "high quality of used product means consumers no longer are buying 'someone else's problem.'"

The average price of a used vehicle in Canada is just under $13,000, said Carlos Gomes, chief economist at Scotiabank. Prices, while having declined since August 2009, are expected to increase as fleet sales fall, he added.

Taylor said a price spread of $10,000 between a two-or three-year-old vehicle and a new vehicle is drawing more consumers into used car lots.

"Ninety per cent of our cars are lease returns," he said. "You can get a mid-sized car with 40,000 to 50,000 kilometres for about $10,000 less than a new vehicle."

While the local economic picture is getting brighter, job insecurity remains high, prompting more consumers to choose used vehicles, said Ilija Dragicevic, ownerof IandD Auto Sales in Windsor.

"A new car is best, but a lot of people can't afford to spend $30,000 or $40,000," said Dragicevic, who recently moved his eight-year-old business to a larger lot along Tecumseh Road East. Sales also rose by about 20 per cent last year over 2010, he said.

Primarily a purchaser of Detroit Three vehicles, Taylor stocks his inventory from the automakers' used-car auctions held on the outskirts of Toronto.

"It's supply and demand," Taylor said. "But, the supply is pretty strong still."

Opinion is divided over whether supply will grow.

DesRosier called the availability of used vehicles unlimited. "Not only are there over 22 million used vehicles on the road in Canada, but there are 240 million parked in the U.S. with very few restrictions on bringing them across the border."

The number of used cars imported from the United States totalled 159,000 last year compared to 124,000 in 2009, said Gomes. But supply will tighten thanks to the collapse in leasing in 2008 and 2009 as well as decreasing fleet purchases.

"Fewer vehicles are coming back from the leasing market and we have also seen a significant decline in the number of vehicles bought from fleets, from a peak of 290,000 in 2006 to 190,000 last year.

"By Grace Macaluso, The Windsor Star

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