An oversupply of used luxury vehicles and significant decreases in prices of used luxury cars are two factors likely driving the growth of the used luxury car sales in the U.S. Flagship models across the major luxury brand are among the cars witnessing significant price decreases. The next sections uncover more details on each of these factors.
1. Excessive Supply of Used Luxury Vehicles
- According to Auto News, the North American used luxury car market is being flooded by used luxury cars from leading brands like Audi, BMW, Mercedes, etc. The excessive supply is causing price volatility and is attracting buyers who are not willing to spend on new luxury cars.
- The growing demand for Tesla’s electric vehicles with a price that corresponds to that of used luxury cars is contributing to the excessive supply. Some BMW and Mercedes customers have opted for Tesla’s $40,000 midsize electric sedan and are trading them of for the Tesla’s. The current trade in ratio for used luxury cars for Tesla’s is 22.2% versus the industry average of 10.9%.
- Automakers’ high leasing rates can also be attributed to the excessive supply of used luxury cars in the U.S. In September 2019, BMW leases accounted for 61% of new car sales, versus 53% for Mercedes-Benz and 49% for Audi.
- The excessive supply of used luxury cars in the U.S. coupled with the ‘Tesla Effect’ are causing significant declines in prices of used luxury cars.
2. Decreasing Prices of Used Luxury Cars
- Values of the major European used luxury vehicles have been declining since 2015. For instance, used BMW cars have dropped in value from 59% to 53% in 2019, Mercedes-Benz from 59% to 55%, and Audi from 63% to 55%.
- Prices of used luxury vehicles across U.S. cities have been dropping and likely attracting new buyers due to their new affordable prices. The price of the BMW i3 has declined by 10%, Mercedes-Benz GL-Class by about 9%, Volvo S90 by around 8%, Land Rover Range Rover Sport by about 7%, etc.
- Atlanta-Sandy Springs-Roswell, Georgia is among the cities that have witnessed significant decreases in prices of used luxury cars. The average in the metro area was 4.92% for all used car models. However, models such as Porsche Macan and the Range Rover have decreased in price by 13%, with the Volvo XC90 plummeting by 12%.
- Audi A8, BMW 3-Series, BMW i3, Genesis G80, Land Rover Discovery Sport, Mercedes-Benz GL-Class, Range Rover Sport, Volvo S60 and S90, are the models that saw the biggest decline in used car prices.
- For instance, a user trading in the 2016 Mercedes-Benz S550 sedan that was valued $95,650 can get approximately $41,500 for the trade in or $47,500 at a dealership.