PRESS RELEASE
Polk Research Claims Used-Vehicle Market Growth Was Exaggerated
Used-Vehicle Market Growth Exaggerated; Polk Research Debunks Current
Conventional Wisdom
DETROIT, Dec., 18 -- Recent estimates that the
U.S. used-vehicle market totaled between 43 and 56 million units in
calendar year 1995 are grossly exaggerated according to findings
released today by Detroit-based Polk. Polk announced that its
research indicates the used-vehicle market totaled approximately 35
million units in 1995 and has remained essentially unchanged over the
past 15 years.
"Our findings run contrary to the recent estimates of many
industry observers," said Bill Sawyer, vice president of Polk's Local
Area Marketing group. "There are estimates as high as 56 million
units for 1995, and a rate of growth of 33% over the last five
years. Our findings strongly contest that."
Polk research also shows that the "affordability crisis" might not
be what it seems. It is true that the average price of a new vehicle
is around $20,000 and has become a source of concern for many
consumers. Yet, with the improvements to quality of automobiles the
length of ownership for the vehicles has increased -- which has an
impact on the actual cost of ownership of the vehicle.
Polk research shows (see chart below) that while the average price
of vehicles has increased 25 percent (in inflation adjusted dollars)
over the last 10 years, it closely reflects the 24 percent increase in
life expectancy. This means the annual cost of ownership for an
average vehicle has remained virtually unchanged!
Year Average Cost Cost in 1995 Life Depreciation a
Dollars Expectancy Year
1985 $11,925 $16,358 13.71 $1,193
1995 $20,450 $20,450 16.97 $1,205
Change 71.5% 25.0% 23.8% 1.0%
Polk also discovered that the conventional wisdom that the average
car has three owners throughout the life of the vehicle is true. But
what has changed is the point at which the vehicles are changing
hands. In 1995 the average owner held onto a vehicle for 5.7 years --
1.1 years more than in 1985, and larger portions of transactions
occurred in vehicles 1-3 years old and 8-10 years old than any other
age grouping.
From these findings, the Polk research makes three major points:
1. The used-vehicle market is not growing, it is remaining constant in
the mid-30 million unit range,
2. The cost of ownership for the expected life of a vehicle has remained
virtually unchanged over the past 10 years.
3. Challenges the assumption that more consumers are buying a
used-vehicle instead of a new, bringing into question the premise
behind some emerging merchandising strategies for new and used
vehicles.
"At risk because of the miscalculations of the marketplace is the
'superstore' phenomenon," said Sawyer. "The rush to establish these
retail operations may be a risky proposition because of the reliance
of these retailers on a consistent, reliable source of high-quality,
low-mileage, late-model vehicles. Future availability of these highly
desirable used vehicles is subject to potentially radical fluctuations
in supply precipitated by changes in manufacturer marketing
strategies."
Polk provides multi-dimensional intelligence information solutions
to companies as a statistician for the motor vehicle industry; a
direct marketing resource; a supplier of demographic and lifestyle
data and database marketing services; a publisher of city directories;
and a data enabler for geographic information systems. Polk is a
privately held global firm with facilities around the world including
the United States, England, Germany and Barbados.
For more information, or a copy of the full report, contact Steve
Ludwig, public relations director for Polk at 800-525-3533 ext. 5696
or sludwig@polk.com.
CONTACT: Steve Ludwig of Brown Radman Wolper Marketing Communications,
303-298-8470
