Used vehicle demand continued to surge through February and into March, pushing inventories down as dealers adapt to consumer behaviors.
Dealers sold 1.49 million used vehicles over the course of February, pushing retail sales up 13.5% over January and 10.7% over the prior-year period. According to Cox Automotive, last month was the best for used car dealers since March 2023. Should growth continue to accelerate in the weeks ahead, dealers may even surpass 2022 levels of preowned sales, which were artificially buoyed by the absence of new vehicle inventory.
Tax season has been a primary contributor to this late winter rush. While both new and used vehicle sales typically rise in conjunction with tax return deposits, the average return in 2024 is 6% higher than in 2023, explaining the sudden surge in demand. Last year also saw the return of new car inventory, which had the effect of sapping customers away from the preowned market.
While the increase in sales is an encouraging sign, used vehicle inventories are struggling to keep up with the demand. At the beginning of March, days’ supply was 20% lower than at the start of February, falling from 53 days to 44 days. Unsold inventory also declined in March, shedding approximately 60,000 units from the previous month’s total. However, both inventory and days’ supply were improved over 2023, growing 9% and 2%, respectively.
Although sales typically climb heading into spring, the used vehicle market is performing exceptionally well this year, achieving a much-needed comeback after its struggle in 2023. Dealers can take further advantage of this demand by promoting their fixed-ops offerings to preowned buyers, ensuring they continue to earn their customers’ business for the lifetime of their purchase.
