Used vehicle sales increased in July as customers prioritized affordable car prices and inventory normalized from 2022’s tumultuous market conditions.
According to Cox Automotive data, purchases from retailers rose 6% from June to their highest since February, putting used vehicle sales just 0.5% behind last July when the market was still profiting from OEM production constraints. This small but helpful surge in demand softened the impact of falling preowned car prices, which declined an average of 1.6% month-over-month and 11.6% year-over-year. Depreciation over the period was driven most by compact and midsize vehicles, which saw respective price decreases of 15.9% and 14.2%. Pickups continued to outperform other segments, devaluing just 6.6% from last year.
Retail inventory weakened slightly under higher demand for preowned cars. Days’ supply of used vehicles dropped three days from June and eight days from July 2022, hitting 46 days by the end of the month.
While the news of sinking prices may be disheartening for dealers, Chris Frey, senior manager of economic and industry insights for Cox Automotive, noted that the used vehicle profits were still exceeding pre-COVID earnings. “From July 2020, there were 22 straight monthly double-digit increases through April 2022; we’ve had just six double-digit declines since October last year, with only four of them consecutive,” he stated. With sales strengthening and inventory stabilizing, Frey predicts prices will remain reasonably healthy “through December.”
The normalization of prices and supply in the used vehicle market is to be expected, given the pace at which OEMs have ramped up manufacturing. No longer presented with limited choices, customers have gone back to buying models fresh off the production line. But despite this shift in demand, preowned dealers are still seeing robust sales thanks to the lack of affordable pricing in the new car market. Current model-year price tags have simultaneously disillusioned car buyers and increased the attractiveness of the used vehicle market. As long as they focus on the long-term gains, dealers can feel more secure about their businesses even as prices trend downwards.