Wholesale used vehicle values declined in the first two weeks of February, following similar drops in listing prices and inventory levels seen across the pre-owned market throughout January.
According to Cox Automotive, the month-over-month decrease in pre-owned auction prices was 0.9%, while the year-over-year drop was 13.8%. In early 2023, used vehicle prices were heavily inflated, driven up by restricted inventory levels and unappeased demand, both in the new and pre-owned market.
But over the last 12 months, new vehicle supply shortages have largely disappeared thanks to renewed automaker production. The resulting increase in consumer choice led to a re-balancing in demand, easing inventory pressures for pre-owned cars and causing their prices to drop. These trends have had a similar effect on the wholesale and retail markets.
However, February’s price decrease came with a similar decline in wholesale inventory. Used vehicle days’ supply shed one day from the end of January, which itself was four days behind the end of December. Compared to last February, mid-month inventory levels were ahead by two days. This suggests that the last one-and-a-half months have seen an uptick in demand for pre-owned cars, although not enough to restrict inventory to the same extent as last year.
This is also reflected in the daily sales conversion rate observed over the first 15 days of February. For used vehicles sold at auction, the rate was 59.1%, which Cox Automotive notes is higher than usual for this time of year. On the retail side, the 30-day daily sales rate for pre-owned cars started the month at 1.44 million units, ahead of the 1.3 million reported in January.
These shifts in used vehicle pricing, inventory, and sales may suggest that demand is currently being pulled away from the new car market, potentially due to the lack of affordability in the segment. Should pre-owned prices continue to drop, sales may rise even faster, creating favorable conditions for dealers in the months ahead.
