Wholesale used vehicle prices have been dropping, and so far, retail prices have not declined as quickly, but they will.  -  Graphic: Cox Automotive

Wholesale used vehicle prices have been dropping, and so far, retail prices have not declined as quickly, but they will.

Graphic: Cox Automotive

The used-vehicle market has stabilized, resembling the pre-pandemic normal, with inventory holding steady and prices dipping from their record highs, according to the Cox Automotive analysis of vAuto Available Inventory data released Jan. 13.

The total supply of unsold used vehicles on dealer lots, both franchised dealers and independents, across the U.S. stood at 2.32 million units at the close of December. That was in line with a revised 2.33 million at the end of November and down about 3% from the 2.38 million in December 2021.

Total days’ supply at the end of December stood at 54, in line with the revised 54 days’ supply at the end of November. Days’ supply was 7% above the year-ago levels.

The Cox Automotive days’ supply is based on the daily sales rate for the most recent 30-day period, in this case, ended Dec. 26. Sales in the period were 1.29 million vehicles, the same as were sold in the equivalent 30-day period in November. Sales remained relatively strong during the fall, a time when sales generally weaken. Still, sales near year-end were 9% below the previous year.

“As the supply of new vehicles improves – and it is improving rapidly – demand for used vehicles is declining,” said Cox Automotive Chief Economist Jonathan Smoke, in a news release.

Used-vehicle prices also are in decline. The average list price was $27,143 at the end of December, down from the revised $27,156 at the end of November and from $28,193 at the end of 2021. Prices had shown some year-end strength but closed the year down 4% from the end of 2021.

Wholesale prices have been dropping, and, so far, retail prices have not declined as quickly, but they will, noted Chris Frey, Cox Automotive senior manager of economic and industry insights. “It’s a good sign economically that prices are decreasing, making the vehicles more affordable despite interest rate increases,” he said. Record used-car prices had played a major role in inflation a year ago.

As with new cars, the lower the price, the tighter the inventory. Days’ supply for under $10,000 vehicles was 36. Day’s supply for vehicles priced between $10,000 and $15,000 was 45, between $15,000 and $20,000 was 51, and $20,000 to $25,000 was 57. All other price categories had about a 60 days’ supply.

Lexus, Subaru, Toyota and Mazda had the lowest days’ supply of used vehicles at 50 or fewer days’ supply. Also at the low end were Acura, Honda, Hyundai, Mitsubishi and Nissan, in the low 50s for days’ supply.

CPO Sales Hit 2022 Forecast, Set to Ease in 2023

Certified pre-owned (CPO) sales in December rose 13.6%, nearly 27,000 units, from November to finish at 225,241. This total is up 20.6%, or nearly 40,000 units from December 2021. CPO sales finished 2022 at nearly 2.47 million units, a decline of nearly 280,000 units, or 10.2% from 2021 CPO sales.

Leveraging a same-store set of dealerships selected to represent the country from Dealertrack, Cox estimates that used retail sales declined 7% in December from November and that used retail sales were down 10% year over year, which was the same as November’s performance.

Chris Frey, senior manager of economic and industry insights at Cox Automotive, said in a news release: “December’s total CPO sales of 225,000 were the highest all year and were about 4,000 units shy of the 2021 monthly average of 229,000. Still, 2022’s monthly average of 206,000 has a long way to go to get back to 2019’s 234,000 monthly average when the market was considered more normal. The call last month to match or exceed 160,000 sales to hit our 2.4 million unit target occurred, by a big 65,000. Shares of CPO sales were consistent over the last 3 months with the Asian brands again at 51%, European makes steady at 19%, and the Detroit 3 at 31% in December. The shares total just over 100% from rounding.”

Lack of New-Vehicle Supply Hurts CPO Market

While demand can support more CPO, the market will ultimately be limited because of supply constraints. In 2023, the used market and CPO will likely decline further. Interest rates are expected to be at levels not seen in more than 20 years. The economy is expected to slow because of higher rates and tighter credit conditions. Most importantly, the supply of younger vehicles that can be certified will be down dramatically as the large declines in sales and leases since March 2020 factor into the available used-car supply. After seeing a 10% drop in 2022, Cox Automotive forecasts CPO sales to decline 11% in 2023 to 2.2 million units, which will be the lowest CPO volume in 10 years.

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