Sapped used-car market on cusp of upswing, forecast says

With used-vehicle prices back in depreciation territory, May and June could go down in the books as the “worst May and June in history” for used vehicles losing value, Smoke said.

However, those vehicles losing value is “a good thing for the people who’ve been sitting on the sidelines not able to find a vehicle at the price point they want,” Smoke said.

Floor under prices

There is a scarcity of used vehicles less than 4 years old because of a COVID-19 pandemic-induced lack of new-vehicle production in 2020 and 2021. Smoke said that downturn spelled trouble for the used-vehicle supply because sales into inventory channels that “feed” the market — leasing volumes and rental and fleet sales — fell dramatically.

Those volumes are beginning to make a substantial recovery, but that prolonged downturn has manifested into a tight used-vehicle supply, Smoke said.

“It means there’s an absolute floor of where used vehicle prices can go,” Smoke said.

Year-end outlook

Modest price decreases are likely to continue in the second half of 2023, according to an updated year-end Cox Automotive estimate.

Cox Automotive also estimates 35.7 million used vehicles will be sold in the U.S. in 2023, marking a very slight increase from its previous forecast of 35.6 million. Cox also estimates 18.9 million used vehicles will be sold at retail in 2023, a figure unchanged from its previous forecast. In its mid-year review, Cox boosted its estimate for certified pre-owned vehicle sales to 2.6 million, up from 2.2 million previously.

Those numbers illustrate a market that has drastically evolved since 2021, when strong demand and favorable economic conditions boosted used-vehicle sales to a record 40.6 million in total and 21.2 million at retail.