Inventories are creeping up; wholesale prices are creeping down.
Used car prices are going crazy from the crunch of chip shortage (though we may get relief soon) and plant shutdowns due to the Covid pandemic shrinking the new car market. At the end of June prices were at an all-time high, with the average used vehicle going for $25,101, cresting the $25K mark for the first time ever. However, used vehicle inventory improved slightly and wholesale prices are going down, which means we might be coming out of this phase.
"While new-vehicle inventory continues to drop, the used-vehicle market is showing small signs of improvement, with slower sales allowing inventories to creep upward," said Charlie Chesbrough, senior economist, Cox Automotive. "With wholesale prices of used vehicles beginning to retreat from record highs, the worst of the supply crunch in the used market may be behind us."
The total supply of used vehicles on lots in the US grew to 2.45 million at the start of this month, up from 2.38 million units in June. That's 6% above the same time in 2020 but still below 2019. A year ago, the average listing was $20,000, so prices have been rising, but the rate of the rise seems to be slowing.
Used vehicle days' supply was also up entering July. Lots had 38 days of cars at the beginning of June and 41 days this month. Days' supply is calculated based on the previous month's selling rate and takes into account not only volume but also outside factors such as inclement weather that affect sales. By the end of last month, the sales pace was below both 2020 and 2019 levels.
Wholesale prices are down a tick too, according to the Manheim Used Vehicle Value Index. Manheim is a subsidiary of Cox, and notes that we should see a continuing amount of depreciation in the days ahead.
It's good to hear anything but gloom and doom. The last few months it's been all plant shutdowns and delays of things like the Ford F-150. We'll keep an eye on the numbers, but hopefully next month we'll be reporting that supply has continued to increase, so we can get back to demanding used cars at reasonable prices.