Used vehicle prices dropped again across November and December as trends within the retail automotive sector continued to normalize in the post-pandemic economy.
According to auctioning platform ADESA, wholesale used vehicle prices averaged $14,012 in November, a year-over-year decline of 4.6%. The drop coincided with an industry-wide seasonal slowdown in demand, although sales appeared to have recovered slightly in December. Nevertheless, pre-owned cars are still worth 26.5% more at auction than the pre-2020 average.
Wholesale used vehicle prices peaked in mid-2022 at $17,843. During this period, new car inventory was heavily constrained due to suspended manufacturing, leading to a surge in demand for pre-owned units, which were also facing inventory pressures due to extended vehicle lifetimes. While prices in the segment have remained inflated, they have trended steadily downward since the start of 2023 as automaker production continues to recover.
To combat higher auction prices and inventory constraints, used vehicle dealers have turned to a variety of non-wholesale sources, pursuing multi-channel strategies. This has helped retailers navigate a rapidly shifting automotive landscape.
However, as demand continues to normalize, car dealers may need to narrow their acquisition efforts. In the coming months, retailers will need to carefully analyze used vehicle sales and adjust supply accordingly to avoid facing similar challenges that plagued some of the larger online dealerships, namely Carvana.
In response to the massive spike in demand for pre-owned cars in 2022, the e-commerce platform substantially ramped up its acquisition efforts, entering 2023 with a surplus. This strategy nearly resulted in the company’s collapse, as executives failed to account for the rapid recovery of automaker production, which drew many consumers away from the used vehicle market, landing the brand in debt.