July 2020 Kontos Kommentary: Current Used Vehicle Market Conditions

Summary

The rate of increase in average wholesale prices slowed a bit in July but still represented substantial gains over pre-COVID and year-ago levels.  As we’ve emphasized in past editions, part of this increase is due to selling a more limited quantity and higher average quality (age, mileage, condition, size, etc.) of vehicles; but dealer demand, which reflects consumer demand, for used vehicles is also a key driver to higher prices.  These relatively strong market conditions continued into August.

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in July averaged $13,375 — up 2.6% compared to June, up 18.0% compared to pre-COVID/February and up 16.8% relative to July 2019, as seen in the table below.

Prices were up across all model class segments.

When holding constant for sale type, model-year-age, mileage, and model class segment — using criteria that characterize off-lease units — prices were up on a year-over-year basis for midsize cars and midsize SUV/CUVs in July, as seen in the following table:

The following graph shows trends in average prices throughout the pandemic, using the same criteria:

As the graph shows, average prices across all vehicle segments have generally gone from year-on-year losses in March and April to gains in June, July and August, after rebounding in May.

Based on NADA data, retail used vehicle sales by franchised and independent dealers were down 1.3% month-over-month but up 2.1% year-over-year in July. July CPO sales were down 2.5% from the prior month but up 7.8% year-over-year, according to figures from Autodata. Additional retail sales trends are available via KAR Global’s Interactive Dashboards.

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 Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, 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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