Analysts continue to read the tea leaves as to the state of used vehicle retail prices. But one thing is certain: they remain high, despite wholesale price declines.
The average listing price of a used vehicle was nearing $30,900 in May 2023 according to CarGurus, up 0.4% from the previous month. But prices stopped their relentless march upward mid-month. Prices are down 3.1% in May 2023 from May 2022.
The fluctuating retail price of used cars comes despite declining wholesale used car prices, according to Cox Automotive’s Manheim Used Vehicle Value Index. Wholesale used-vehicle prices decreased 2.7% in May from April, and are down 7.6% from the same period a year ago.
May’s year-over-year decline accelerated from April and March,” said Chris Frey, senior manager of economic and industry insights for Cox Automotive. “However, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year.”
That said, prices may not continue their decline for one reason according to Frey. “As used retail inventory is still below last year, and that tends to keep buyers at the auction, supporting prices.”
Still, daily sales conversion fell to 56.3%, down from 59.9% in May 2019 and below normal rate for this time of year.
Still, year-over-year used car prices continue to drop.
Compared to May 2022 prices, the price of pickup trucks declined 4.6% in May 2023 according to Manheim Market Report. Compact car prices dropped 7.2%, vans dropped 7.5%, midsize cars plunged 7.9%, SUVs are off 8%, while luxury car tariffs dove 10.8%. Overall, year-over-year, prices are down 7.6% in May 2023 compared to the same period last year. Why? Simple. Retail sales are estimated to be down 11% year over year in May, according to Cox Automotive, even as the average retail listing price for a used vehicle inched 0.8% higher in the past four weeks as dealers try to maintain profitability.
Used car inventory remained at 45 days in May 2023, unchanged from the previous month, but four days below May 2022.
What this means for dealers
While dealer sentiment in the U.S. improved slightly in the second quarter of 2023 according to the quarterly Cox Automotive Dealer Sentiment Index, overall sentiment suggests dealers foresee a weak market going forward. While both new and used vehicles feel the market is stronger this quarter than last, weak economic conditions and high interest rates are causing dealers’ negative outlook.
“Our latest dealer sentiment index clearly illustrates how the market has shifted in the past year,” noted Cox Automotive Chief Economist Jonathan Smoke. “Dealers are now facing an uncertain economy and high loan rates that are keeping many would-be buyers on the sidelines.”
Typically, the second quarter brings out the most buyers, so it should be an interesting Summer.