"All Things Used Cars" Market Update 6/16/23

The Automotive Advisor Team

Economic Update:  

·        The May Jobs report highlighted continued momentum in the labor market.

·        However, divergent results from the household and establishment surveys warrant some skepticism toward the strong headline figures. 

·        Wage growth continued rising by 4.3% y/y but overall data suggest that the labor market is softening. With the number of employed people falling by 310K and the unemployment rate rising to 3.7%. it looks as though inflation is still easing. As such, the report should not change the Fed’s plan to pause. That’s good news.

New: 

·       New sales are down 23K from last week. Sales moved down this week pushing supply up. The sales pace is now running 11% above last year. The average Listing Price is $47,172, down $268 from last week. 

Used Cars:

·       Used sales were down 30K from last week after being us 84K the prior 3 weeks. The sales pace was seeing nice gains in early May but dipped and sales are now down 8% from last year. The average Listing Price is $27,256, up $61 from last week but should be impacted by the slowing sales in the coming weeks.

Acquisition:

·        Average retail price dropped $68 for Model Year 2020 but its average wholesale value dropped $249 for MY 2020. Said another way, the value of the acquisition is dropping faster than the sale price of the same model year. Last Week we had a $464 gain and this week we have a $181 gain. So, although the market’s dropping, there are still margin opportunities in the wholesale acquisition channel.

Summary:  

Our dealer visits and conversations this week reveal that the market is slowing, and dealers are having a harder time bringing customers in to buy vehicles. Whether it be affordability, credit, negative equity, or simply that consumers are pulling back due to economic conditions outside of automotive, many operations are getting nervous and creating unique ways to retail inventory. Looking closer you can see the market still has many growth opportunities for the taking if you chose.