Completely insane irrational price increases of used vehicles in severe unwind mode.
By wolf richter For wolf street,
Prices for used vehicles sold at auction in August fell 4.0% from July, and are down 12.5% from the peak in January, according to the Used Vehicle Value Index by Mannheim on a blended, mileage- and seasonally-adjusted basis. Largest auction house in America. But these wholesale prices are skyrocketing despite the fall.
Dealers buy at these auctions to stock up on vehicles to sell to their retail customers. Their concern about what retail customers might be willing to pay is reflected in these price drops.
Retail buyers have lost interest in these sky-high prices, many people have come to their senses and refuse to pay whatever they want now, and they realize that they will not be able to afford it in a year or two or three. They can drive for what they already have. Pre-owned vehicle sales volumes declined sharply throughout the year – although there is an ample supply of pre-owned vehicles.
And compared to totally insane prices a year ago, wholesale prices were still up 8.4% in August:
And compared to August 2019, before prices skyrocketed, wholesale prices for used vehicles are still up nearly 50%. So the prices have come down somewhat, but they are still very high.
Retail sales of used vehicles fell 9% year-over-year in August, and were down 19% compared to August 2019. Cox Automotive, citing data from its DealerTrack unit, based on same-store results. But July sales fared even worse: down 29% compared to July 2019.
According to a separate Cox report, sales of “certified pre-owned” vehicles, which many buyers view as a less expensive alternative to new vehicles, were down 5% year-over-year in August and 18% from August 2019. Were. Automotive.
And dealers are starting to feel the pressure to lower their prices. Before the pandemic, the pressure to reduce prices was high and a daily presence, forced by competition from dealers and potential buyers who refused to pay anything.
But in late 2020, the whole mindset changed – as soon as the inflationary mindset set in – and buyers were willing to pay whatever they charged, and dealers charged whatever they got, and that’s when dealers sold vehicles at auction. bought the next batch, then paid whatever they wanted, knowing they could pass on those crazy prices. But this is changing now.
While still relatively modest compared to pre-pandemic years, pressure from low prices has been building throughout the year, according to a comprehensive sentiment survey of auto dealers conducted on a quarterly basis by Cox Automotive. The current survey for Q3 was released on 8 September. Orange = Franchised Dealer (New & Used); red = independent dealers (used only) who feel the greatest pressure to lower prices; blue = composite (via chart Cox Automotive – Click on it to enlarge):
The utterly insane and irrational price hike of used vehicles is now in serious rest mode, as enough potential buyers have gone on a buyers’ strike. But prices have risen so quickly, and so quickly, that a big drop will drive buyers out again because they consider those low prices to be great deals after crazy spikes, but those prices may still be 40% higher. Three Has been years ago.
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