August/September 2021 Kontos Kommentary: Current Used Vehicle Market Conditions

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Summary

The two-month decline in average wholesale prices ended in August, with prices recovering thus far in September to peak levels achieved during the spring. The continued chip shortage on the new-car side and the “perfect drought” in supply on the used-car side are the main reasons for this.

However, retail used vehicle sales and CPO sales have softened not only because of used vehicle supply shortages that limit vehicle selection, but consumer awareness of high used vehicle prices that may lead some shoppers to delay their purchases.

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in August averaged $14,712 — up 3.2% compared to July, up 9.0% relative to August 2020, and up 30.8% compared to pre-COVID/August 2019 as seen in the table below.

All model class segments except fullsize pickups showed month-over-month increases in average prices. The declines to average pickup truck prices were modest and from high levels.

When holding constant for sale type, model-year-age, mileage, and model class segment — using criteria that characterize off-lease units — prices in August were up significantly versus August 2020 and August 2019 for both midsize cars and midsize SUV/CUVs, as seen in the following table:

The following graph shows trends in average prices by major vehicle type and in total by week through September 19 using the same criteria:

Overall average prices remain around 40% above pre-COVID averages, with car segments outperforming SUVs and pickups.

Based on NADA data, retail used vehicle sales by franchised and independent dealers in August were down 2.2% month-over-month and down 2.8% year-over-year. Year-to-date through August, sales are up 12.5% versus 2020 and 1.6% compared to 2019/pre-pandemic levels.

Similarly, CPO sales were down 10.4% from the prior month and down 6.9% versus last year, according to figures from Autodata. On a year-to-date basis through August, CPO sales remain up 11.4% compared to last year and 1.8% versus 2019.

Source: Analysis is based on over seven million annual sales transactions from over 250 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. KAR Global Analytical Services segregates these transactions to study trends by vehicle model class, sale type, model year, etc.

Disclaimer: The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Global. The views and analysis are not the views of KAR Global, its management or its subsidiaries; and their accuracy is not warranted.

Forward-Looking Statements: The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts (including, but not limited to, expectations, estimates, assumptions and projections regarding the industry and business) may be forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

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