Used car prices and retail sales declined over May as consumers and dealers grappled with economic headwinds, according to data from Cox Automotive and the Manheim Used Vehicle Value Index.
Used car prices dropped 2.7% month-over-month and 7.6% year-over-year to hit their lowest number in 2023. Retail sales held steady from April but declined 11% from May 2022. Similarly, days’ supply of preowned vehicles remained unchanged from the previous month, resting at 45 days but falling short of last year’s 49. In contrast to the used market, new-light-vehicle and fleet sales increased 22.9% and 45%, respectively, from the prior-year period.
Chris Frey, senior manager of economic and industry insights at Cox Automotive, conceded that used car prices could decline further but “might slow over the next several months as we encounter the lower prices seen at auction from May through November last year.” However, he warns that “Two consecutive reads in either measure do not a trend make,” going on to explain that the presence of cheaper vehicles could also drive demand and keep values steady.
While its report acknowledges that lower used car prices favor consumers rather than dealers, Cox Automotive also predicts that any shift toward affordability will be offset by the auto industry’s ongoing supply struggles. Other factors, such as interest rates and inflation, have further leveled the playing field between buyers and sellers. But despite the stagnating market conditions, storeowners are likely anticipating better business in the coming months.
Although retail sales appear to be stable, many expect the exorbitant price tags of new vehicles to eventually push customers back to the preowned market, potentially driving used car prices higher. However, whether affordability will spur short-term demand in the preowned market or simply force car manufacturers to offer more discounts remains to be seen.