Used-Car Distribution Market in Japan: Key Research Findings 2022

Number of Used-Car Retailed in 2021 Estimated as 2,685 Thousand Vehicles

Yano Research Institute (the President, Takashi Mizukoshi) carried out a survey on the domestic used-car distribution market, and found out the trends by major category (used-car retailing, used-car purchasing, auto auction (including bidding), and used-car exporting), trends of market players, and future outlook.

Market Overview

The domestic number of used-car sold in 2021 was estimated as 2,685 thousand units.

Disruption of supply chains caused by the coronavirus pandemic brought about sluggish supplies and sales in new cars, and expanded the demand for secondhand late-model vehicles that ran shorter distances. Decreased new car sales led to smaller numbers of cars for trade-in, making used-car dealers to enhance securing of quality vehicles as many as possible for retail. On the other hand, 2021 was a difficult year for the dealers to purchase and secure secondhand cars, because competition with used car exporters became fiercer, and because average contract prices at auto auctions continued rising.

In such a situation, use of inventory sharing services has invigorated as a measure to ensure procurement of used cars. Those companies with enough capital are showing high profiles, such as new car dealers commencing used-car dealings in earnest, major used-car specialty dealers strengthening trade-in and purchasing directly from users by taking advantage of their high awareness and retailing capabilities, and major chains of used-car purchasing accelerating the shift to “purchase -> retailing” from “purchase -> auto auction”. Hereafter, securing of revenues including post-sales services, and customer retention are likely to become more important.   

Noteworthy Topics

Used-Car Retailing that Depends on Ability to Purchase from Users

It is still obscure when supplies and sales of new cars recover to the level of before-corona. In such a situation, continuous imbalance in supply and demand is likely to keep the prices of secondhand cars at a high level. Therefore, how to procure vehicles at as low price as possible is a significant issue to secure profits in used-car dealings. As a procurement route, purchasing of used cars directly from users has become highly competitive.

New car dealers have strength in potential access to quality secondary vehicles that are late model and shorter distances traveled, by offering residual value (balloon payment) to customers. Because sales of new cars are stagnant and used car sales can be more promising revenue sources, new car dealers have become earnest in utilizing trade-in vehicles for retailing.

On the other hand, major used-car dealers have accelerated in rolling out new stores to nationwide, focusing to increase the number of used cars to purchase directly from users against the backdrop of their retailing abilities and high awareness, aiming to acquire and expand lifelong loyal customers including those for post-sale services.

In addition, those major chains of used-car purchasing that conventionally sold their purchased vehicles through auto auction are fully shifting to retailing of what they purchased, which is intensifying the competition with major used-car specialized businesses that are about to show a major presence in the used-car purchase market.

As such, in anticipation of future increasing demand for used car retailing, it can be said that how to purchase and obtain used cars from users is crucial in the current market conditions.

Future Outlook

In Japan, decline of new car sales hereafter is inevitable from the demographic perspective, which directly connects to decrease in secondhand vehicles generated. When taking into account of a tendency to use the same vehicle for longer years on average, further decrease in the number of quality vehicles that are late model and shorter distances traveled is expected, which is likely to further reduce the distribution volume of secondhand vehicles in the market.

Hereafter, those used-car dealers with enough capital such as new car dealers and major used-car specialized dealers are likely to retain customers with quality products for retailing, and increase the market share through lifelong trading with customers. This is expected to reduce the distribution volume of such late model cars with shorter distances traveled in the auto auction market. Small-to-middle-size used-car dealers forced to compete for vehicle purchasing with used-car exporters that are showing high-profile in the auto auction market seem to be crucial to try to develop suppliers and to expand new sales channel for acquiring middle-to-late models to continue or expand their business.

Research Outline

1.Research Period: May 2021 to March 2022
2.Research Object: Automakers, car dealers, auto auction host companies, used car traders and used-car wholesale buyers, and automobile users
3.Research Methogology: Face-to-face interviews by the expert researchers (online included), and literature research

Face-to-face interviews by the expert researchers (online included), and literature research

The used-car distribution market in this research consists of the following four markets: the markets of used-car retailing, used-car purchasing, auto auction (including bidding), and used-car exporting. 

Published Report

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