YOY Downer: November Used Vehicle, CPO Sales Showing Losses

Total used-vehicle sales in November are estimated to be near 2.7 million units, down 4.5% from November 2021, Cox Automotive reported Dec. 15.

The seasonally adjusted annual rate, or SAAR, is estimated to have finished near 35.5 million, down from last November’s 37.2 million level but above October’s revised 37.6 million pace. Used retail sales were also estimated to be lower in November.

“The used market is changing.  Retail prices are starting to show weakness, and dealers may now be more willing to negotiate," said Charles Chesbrough, senior economist at Cox Automotive, in a news release. "Higher interest rates are constraining affordability, and the number of potential buyers is in decline. Greater discounting may be needed to get buyers able and interested again in purchasing.”

Retail used-vehicle sales — the volume of vehicles sold via a dealership, thus removing private party sales — are estimated to be 1.4 million, down 3.7% from November 2021. The used retail sales pace ticked down to 18.7 million in November from October’s revised 19.8 million level.

Year to date, the total used market is currently on pace to finish the year down more than 12% from the 40.6 million recorded in 2021.

Double Digit Decline in CPO Sales for Year

Certified pre-owned (CPO) sales in November fell 4.4%, just over 9,000 units, from October to finish at 198,313, Cox reported.

However, this total is up more than 17,000 units from November 2021. Year to date, CPO sales are down over 318,000 units, or 12.4%, compared to the same time last year. Cox Automotive expects CPO sales to finish near 2.45 million for 2022, an 11% decline from 2021.

Leveraging a same-store set of dealerships selected by Dealertrack to represent the country, Cox first estimated that used retail sales declined 1% in November from October, and that used retail sales were down 10% year over year. Compared to November 2019, sales were down 22%, which was an improvement from October. Credit transactions heavily influence the same-store data series, and growth in cash purchase activity is likely causing the estimates to decline more than actual market sales.

Used Retail Sales Challenged by Multiple Factors

Used retail vehicle sales have been challenged throughout 2022 as multiple factors, including COVID, inflation in the broader economy, delayed tax refunds, and increasing interest rates, have weighed on demand. Of biggest concern is higher interest rates, which have been the principal cause of the slowing in sales. As the year nears its end, interest rates for used loans have increased more than three percentage points and are likely to rise by another percentage point by Dec. 31, given the plans from the Fed. As a result, the interest rate change alone produces a 12% higher payment, pushing payments to a level that is out of reach for many traditional used-car buyers.

The used-car market has benefitted from a shift in the composition of buyers as scarcity and affordability in the new market have pushed many to consider used instead. CPO benefits from being positioned as the best alternative to a new vehicle. Meanwhile, consumers benefit from average interest rates on certified units being more than two percentage points lower than average used loan rates. On a year-over-year basis, most channels were little changed in November regarding credit access except used loans through franchised dealers and certified pre-owned (CPO) loans having loosened the most, according to the Dealertrack Credit Availability Index.

“Current year-to-date CPO sales hit 2.24 million at November’s end," said Chris Frey, senior manager of economic and industry insights at Cox Automotive. "To match or exceed our call of 2.4 million, CPO sales would have to be 160,000 or more. The last time they were at or below this level was in the March to April 2020 selling period. Given the sales pace this year and barring any major impacts from interest rates or other unforeseen events, we should hit our target – and then some.”