The data used for its analysis was sourced from the Manheim Used Vehicle Value Index, a well-respected key performance indicator closely followed by U.S. retailers. The Index revealed that used car prices had fallen roughly 15% in 2022, making it one of the worst performing years on record. In 2021, automakers were forced to halt operations in response to material and labor shortages, forcing many would-be buyers to turn to pre-owned sellers. Consequently, the used-vehicle market was performing at an all time high when it entered into the new year, and vehicles were selling at record highs. However, external factors, such as supply chain recoveries and resumed production, gave consumers more choices in 2022, and caused the inflated demand to drop significantly in the last three quarters, bringing prices down with it.
In spite of the year’s poor performance, however, Cox argued that the two years of respective highs and lows were good indications that a market normalization would occur, especially since the external factors prevalent throughout both years had mostly run their course. Although the firm’s chief economist, Jonathan Smoke, warned that a pre-pandemic used-vehicle market may never be seen again, he noted that “all indicators point to reaching equilibrium in the second half of 2023.”
This is good news for pre-owned retailers, who have struggled with the volatility of the used-vehicle market for several years. Although the auto industry is expecting to encounter more difficulties than ever in the first two quarters of 2023, it is generally agreed that with an easing of supply chain strains, a halt to interest rate hikes and increases to dealership inventory, later months are likely to function normally.
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