In recent months, there has been a surge in demand for used vehicles, but how long will the used car market continue to boom? Here to discuss this topic further is Jasen Rice, the owner and founder of Lotpop, and the host of Used Cars Weekly right here on CBT News.
According to recent data from Cox Automotive, wholesale used car prices fell in the first two weeks of July, while used vehicle inventories at dealerships increased. Even though wholesales prices have tapered off, they’re still extremely high compared to the previous year. Rice believes that activity could go down another 10-15% through December of this year.
To stock their lots over the past months, car dealers have gotten creative with their acquisition strategies. Specifically, private-party sellers, which now account for over 50% of used cars being sold. Additionally, consumers are tired of overpaying for goods and services due to supply chain chokeholds. All of these mitigating factors point to a tricky second half of 2021 in Rice’s opinion.
As new cars come in, OEMs have to increase their incentives. If they do, car dealers will have an even tougher obstacle to face. Rice believes that the auto industry will see a softening in retail, and retail drives wholesale. With this in mind, Rice recommends that car dealers stay lean and clean with their inventories, and always carry a 30-day sale rate.
Another major metric that car dealers need to keep an eye on is what Rice calls the ‘middle bucket.” The middle bucket is the inventory that is 31-60 days old. When the middle bucket exceeds 25% of the carry rate, that’s when dealers start fumbling.
Today, the cars that are 31-60 days old were bought at peak prices, so dealers naturally don’t want to come down on their prices. The problem is, whatever dealers are buying now for their buckets in September in October, could be more difficult to sell due to seasonal trends.
Click here to watch the latest episode of Used Cars Weekly.
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