July 25, 2006

Four year-old vehicles sell the quickest, says J.D. Power survey

Toronto, Ontario – A new report by J.D. Power and Associates reveals that four-year-old used vehicles turn over the fastest, averaging only 45 days before sale, quicker than any other cars or light trucks dating back to the 1998 model year. One-, two- and five-year-old vehicles sat for more than 65 days before selling.

The study says that one contributor to the results is that used car retail prices dropped more than 27 per cent from 2003 to 2002 model-year vehicles, the greatest year-over-year drop except for current to one-year-old products. The substantial price drop is due, among other things, to the fact that most new-vehicle warranties have expired by the end of the fourth model year.

J.D. Power also revealed that about one out of every six new vehicle transactions in Canada includes an extended service contract, a much lower take rate than the 29 per cent sold in the U.S. Even in segments with the highest take rates, less than one of every five transactions includes an extended service contract. One reason is the strong leasing activity in Canada; most leases terminate in 36 or 48 months, not long after the new vehicle warranty has expired. Four of the six segments with the lowest take rates for service contracts are luxury segments, reflecting the fact that many luxury products include standard warranties with a longer duration than non-luxury vehicles.

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