Used-car demand stays strong in spring but headwinds remain

When wholesale used-vehicle prices of 2022, many dealers chose to hold off on stocking inventory because they didn’t want to risk it declining on their books, said Chris Frey, senior manager of economic and industry insights for Cox Automotive.

However, once the spring selling season drew near, dealers began ramping up wholesale purchases, Frey told Automotive News. More dealers visited auctions to buy instead of trading among themselves, which helped drive up prices, Frey said. Cox Automotive’s Manheim Used Vehicle Value Index — a measurement of wholesale used-vehicle prices calculated by tracking vehicles sold at Manheim’s U.S. auctions and applying statistical analysis to those figures — recorded four consecutive months of increases from December to March.

Wholesale price appreciation slowed through April into May, Frey said. And for now, wholesale prices appear to be declining at the relatively normal levels that might have been seen in 2019, he said.

“With some of the [vehicle] age cohorts, it’s continued to come down but I would say it’s not precipitously falling,” Frey said.

The values of vehicles Morgan Automotive sells at wholesale auctions instead of putting on its dealership lots went up significantly in the first quarter, which wasn’t surprising, Moore said. So did the values of late-model used vehicles the group buys to retail; by February, those had more than stabilized, bumping up the costs to acquire them.

“Our first quarter started off great in retail used-car sales,” Moore said.

Morgan Automotive, which has more than 60 dealerships in Florida, was up on a same-store used-vehicle sales volume basis by a “significant amount” in January and February, Moore said.

In March, the dealership group did see a small same-store decline in used-vehicle sales volume, Moore said. However, its overall used-vehicle sales volume was up about 8.3 percent year over year in March — aided in part by the store acquisition spree it has been on. Moore estimated overall used-vehicle sales volume was up roughly 10 percent year over year in April.

Moore attributed most of the March decline in Morgan Automotive’s same-store used-vehicle sales to short supply.

“Our inventory levels are low at some of our stores, significantly lower than we would like them to be,” Moore said. “Most of that’s driven by the fact that the new-car inventory on some of our brands just simply hasn’t come back as fast as everyone anticipated.”