Remarketing: Back to Normal?
The used car market is more predictable this year, which is good news for fleets remarketing their vehicles.
Over the past few years, fluctuations in used car prices, along with supply chain challenges and a shortage of new vehicles, created unprecedented challenges and headaches for fleet professionals. Remarketing vehicles has been especially challenging since fleet managers had no choice but to hold on to their aging vehicles longer than they had initially expected.
Fortunately, things seem to be getting back to some kind of normal. However, fleet professionals may still be wondering whether it’s best to remarket their vehicles now, or whether they should hold on to them a bit longer for bigger gains in the near future.
Baris Akyurek, Vice President of Insights and Intelligence at AutoTrader.ca offers a view into where the market is now, and where it’s heading, with a focus on three key factors: supply, demand and pricing.
Demand, he explains, has dropped off since Q3 of 2023, due to the economic situation here in Canada and beyond. “Having said that,” he adds, “since the beginning of August 2024, we are seeing a bit of an uptick in used car demand on a year-over-year basis. So, with the cuts in interest rates, things seem to be normalizing, which is good.”
As far as supply is concerned, Akyurek says that the supply of new vehicles seems to be normalizing, while there seems to be a decline in used car inventory in general over the past few months.
That brings us to pricing. The bad news for fleet managers who want to get top dollar for their used vehicles is that prices have been coming down since the beginning of 2024. “Looking at prices from August 2024, the average price of a used car now is $36,000, which was an 8.6% year-over-year decline,” he says.
Looking ahead to next year, Jim Jackson, Manager of Asset Remarketing at Holman says that the used car market continues to be influenced by a variety of macroeconmic trends, but should be favourable as we move into 2025.
“Throughout the summer,” he adds, “demand for vehicles that are three to four years old (recently off lease) was strong, and is poised to remain better than average as we head into the fall. Since leasing slowed during the pandemic, the supply of these vehicles is rather limited. As a result, model year 2021 and 2022 vehicles are likely to retain above average value.”
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Baris Akyurek. Credit: AutoTrader[/caption]
Sedans vs. light trucks vs. EVs
Looking at the used car market in more detail, Jackson says that in general, “all ICE vehicles that are within the three- to four-year-old model range have performed well in recent months. With the supply of these units rather limited, this is a trend that will likely hold true for the foreseeable future. Additionally, certified pre-owned (CPO) vehicles are in high demand on the secondary market, as well as hybrid and electric models, as a growing number of organizations prioritize sustainability initiatives.”
That said, Akyurek notes that AutoTrader.ca’s yearly EV survey shows a significant drop in the demand for battery electric vehicles, which translates into lower prices for EVs on the used car market.
“We started this survey in 2022,” he explains, “and at that time, 68% of consumers said that they would buy an EV. By 2023, that number dropped to 56%, and in 2024 it’s now at 46%.”
Government mandates are also affecting the prices of used EVs, Akyurek explains, because manufacturers are producing more new EVs as they prepare to abide by those mandates, which further impacts the supply and demand equation that’s putting downward pressure on used EV prices.
“Used EV prices are down 14.2% year-over-year,” Akyurek adds, “which is significantly higher than the 8.6% year-over-year decline in the price of used vehicles in general. So, EV prices are coming down at a lot faster rate, and that’s because of the supply and demand mismatch.”
Preparing vehicles for sale
With used car prices dropping, it makes sense to properly prepare vehicles before putting them up for sale. “As fleet professionals assess the market and their vehicles in preparation for sale,” Holman’s Jackson says, “they’ll need to be mindful of the importance of regular maintenance, as well as the overall condition of their vehicles.”
Back when the used car market was on fire, investing in a used vehicle before putting it up for sale didn’t always make financial sense. In 2024, however, that’s no longer the case, Jackson explains. “This year, the secondary market has performed closer to pre-pandemic conditions, with vehicle condition having a greater impact on resale values,” he adds.
To help optimize resale values, Jackson says fleet operators should prioritize proper maintenance and ensure vehicles are in good condition at the end of their lifecycle. “Beyond maintenance and overall vehicle condition, fleet operators should align with a strategic remarketing partner who can offer insight on reconditioning options, market trends, pricing strategies, auction venues, etc. to help maximize resale values,” he says.
Fleets that are remarketing work trucks that have been upfitted, will have to decide whether to sell their trucks with the equipment in place, or remove the equipment and then put their trucks up for sale.
“Typically, Holman recommends selling a vehicle with the upfit package included, unless it is highly specialized or proprietary equipment, in which case it is likely of more value to your organization than a buyer on the secondary market,” Jackson says. “Most simple upfit packages—racks, shelving, toolboxes, etc.—appeal to a wide range of buyers on the secondary market, increasing the unit’s value. While these upfit packages also have standalone value on the secondary market, the cost (and time) to remove and sell the equipment does not warrant the return.”
Looking towards the months ahead, Jackson offers much-needed comfort to fleet professionals who have been stressed by the turbulent used car market we’ve seen in recent years: “Moving forward, it is likely that the secondary markets overall will be more predictable, with the spring market being particularly robust,” he concludes. “We are also closely monitoring interest rates trends. If/when interest rates decline, it will be a significant catalyst for the secondary market, and will likely sustain strong resale values. Additionally, if the exchange rate is favourable, we may see the export of some Canadian units to the U.S. market.”
