Big Wheels: Used-vehicle values down YoY; dealers selective

Used-vehicle values inched up in September on a sequential basis but remained down year over year in tandem with strong auction sales and a cautious market considering the United Auto Workers strike. The Manheim Used Vehicle Value Index increased 1% quarter over quarter in September to 214.3, a decline of 3.9% YoY , according to Cox Automotive . Weekly value declines were below historical averages at the start of the month but ended the month within normal parameters. [caption id="attachment_58333856" align="aligncenter" width="1920"] Source: Cox Automotive[/caption] September value trends mirrored August in the beginning of the month with depreciation across all market segments, Alex Yurchenko , senior vice president and chief data science officer at Black Book , told Auto Finance News . “In the second half of September, when the strike started, prices for two weeks were almost flat,” he said. “Different segments had different dynamics. This week, the market started to go down again. … There are some segments [in which] prices are either flat or increasing.” On a sequential basis, price increases on pickups, midsize cars and SUVs were above industrywide gains, according to Cox Auto. Prices fell for all market segments on a YoY basis in September, except for pickups, which saw values rise 0.7% YoY. Compact car values fell the most across the industry while luxury and midsize declines outpaced the industry average. [caption id="attachment_58333857" align="aligncenter" width="1920"] Source: Cox Automotive[/caption] Prices are expected to remain higher entering the fall and winter, Chris Frey , senior manager of economic and industry insights at Cox Auto, said today during the company’s Manheim index call. “We saw some reversal of the late spring tide in August, but now we’ve moved a bit higher,” he said. “Prices are expected to remain elevated through year-end and supply remains tight. And that will be key to what we see next year.” Sales down 2% YoY Used-vehicle retail sales declined 10% sequentially and 2% YoY, marking the worst sales performance since June, according to Cox Auto. “The used market started to change in July; momentum improved, flipping the comparison against last year from negative to positive,” Jonathan Smoke , chief economist at Cox Auto, said. “The new market basically maintained momentum this summer.” Used-vehicle retail sales “slowed modestly” last week but are in line with peaks seen last year, Smoke said. “September started slow but gained momentum in the middle, only to slow in the final week,” he said. Multichannel sourcing Used inventory ended September at 47 days’ supply, down two days from the end of August and a dip of seven days compared with September 2022, according to Cox Auto. Wholesale inventory is estimated to have ended September at 26 days’ supply, up one day sequentially but down three days YoY. “As sales picked up in August and September in Manheim, days of supply tightened both on an absolute and a relative basis,” Jeremy Robb , senior director of economic and industry insights at Cox Auto, said during the call. “Supply declined in late summer, running tighter than what we had seen last year.” Dealers are sourcing used inventory from multiple channels amid limited supply, Derek Hansen , vice president of operations and inventory management solutions at Cox, said during the call. “Dealers are having to … think beyond the typical trading process or auction, also to the service lane and to private party,” he said. “Multichannel sourcing will grow in importance over the coming year as we're looking at the current used vehicle supply.” Dealers are also paying a premium to get ahold of some used vehicles, prompting the need to “turn them quickly and have less room for profit,” Hansen said. Elevated interest rates, the UAW strike and concerns regarding the used-vehicle market’s overall performance are prompting dealers to be selective on what they buy, Black Book’s Yurchenko said. Auction conversion rates sit in the low- to mid-50% range, below historical levels. Auction volume “is relatively stable this year, but lower by historical standards,” he said. “With prices and demand , it’s a wait-and-see mode.” Meanwhile, consumer confidence declined 4.5% YoY in September, according to the Conference Board , a nonpartisan think tank. Consumers who plan to purchase a vehicle within the next six months were still up YoY but declined compared with August, while consumers’ view of buying conditions diminished amid high rates and prices. “Last year sentiment tanked from inflation impacts,” Smoke said. “We were seeing improvement at the end of last year, but 2023 started soft and was up and down through the spring. Then all measures of consumer confidence improved in June and July, then turned negative in every month since.” Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas and features a fireside chat with F ord Credit. To learn more about the 2023 event and register, visit autofinance.live/afs/ .

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