Car dealers are cashing in on high mileage vehicles

The chip shortage has caused remarkable pricing and profit shifts for new vehicles industry-wide, with some dealerships charging thousands more than MSRP. The pre-owned market – particularly vehicles three years old and under – is notoriously hot right now also, largely due to limited supply and inflated new car pricing. But new data in a press release from Edmunds shows that dealerships are retailing high mileage vehicles with 100,000 miles and more for higher average transaction prices than ever before.

For high mileage vehicles between 100k and 110k miles, the average transaction price in June 2021 reached $16,489, a 31% increase over a year ago when ATP was $12,626. It’s a record for the data tracked by Edmunds.

Ivan Drury is Edmunds’ senior manager of insights. He says, “It’s been a long-held belief among many car buyers and sellers that a vehicle’s value begins to decline dramatically once it crosses the 100,000-mile mark, but that’s proven to be wrong as vehicle technology and durability have greatly improved over the years. The soaring demand we’re seeing in the used vehicle market right now only further debunks this myth: We’re seeing 7- to 8-year-old high mileage vehicles with more than 100,000 miles commanding prices today that are more like the cost of 5-year-old vehicles with 60,000-80,000 miles a year ago.”

Larger vehicles pushing prices

Americans’ affinity for trucks and SUVs is playing a large part in the increased ATP for high mileage used cars. Trucks such as the Chevy Silverado, Ford F-150, and Ram 1500 in the designated mileage are selling for more than 40% higher than a year ago.

But it’s more than just the prices that are noteworthy. On average, these 100k mile-plus units are selling faster. The average time on the lot, listed as Days to Turn (DTT) has dropped from 37.7 days in June 2020 to just 30.5 days last month.

High demand and high prices an opportunity for dealers

In the press release, Drury advises consumers to see if the market plays in their favor without delay. He says, “Consumers with an old truck sitting in their driveway are in the best position to take advantage of this wild market. But even if you own an SUV or passenger vehicle that’s a bit long in the tooth, you shouldn’t be too quick to assume its value is dead. Chances are it’s worth a bit more — if not a lot more — than you think, which you could use to offset the cost of your next car purchase, or you could simply pocket the extra cash.”

The typical age for models in the 100k to 110k mile range is between 6.5 and 8 years. For franchised dealers, these aren’t often the cars that are sought after to stock the used car lot for various reasons including shorter financing lengths and potential reconditioning concerns or costs, but there’s cause to reconsider.

A dealer could potentially obtain trade-ins for thousands less than the ATP, then assess the potential to recondition and retail or send for wholesale. If retailing is possible for a handsome profit, the reconditioning dollars support the parts and service departments while the salespeople have an additional unit to work with on the lot. There are fewer backend options – extended warranties and protection packages – but F&I managers are still likely to have the opportunity to secure financing for them in the short term.

Especially while new cars and low-mileage CPO vehicles are in short supply, homing in on 100k mile units could keep the profits flowing for your store.

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