June/July 2021 Kontos Kommentary: Current Used Vehicle Market Conditions

Summary

Average wholesale used vehicle prices fell modestly to below $15,000 in June after reaching that threshold for the first time in May, and this moderation continued into July. Lower conversion rates (vehicles sold as a percentage of vehicles offered) are a further indication that dealers may be pushing back on high wholesale used vehicle prices. High used vehicle prices have made national news lately, as the consumer price index rose by a nearly 13-year high of 5.4% annually in large part due to a 45.2% annual jump in the used vehicle CPI. Dealer push-back may therefore reflect consumer reluctance to buy used vehicles with prices so inflated, in turn causing dealers to avoid being stuck with high-priced inventory.

Softer consumer demand for used vehicles may also be indicated by moderating retail used vehicle sales and declining CPO sales in June.

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in June averaged $14,652 — down 2.3% compared to May, up 12.4% relative to June 2020, and up 27.6% compared to pre-COVID/June 2019 as seen in the table below.

All segments except compact cars showed month-over-month declines in average prices.

When holding constant for sale type, model-year-age, mileage, and model class segment — using criteria that characterize off-lease units — prices in June were up by over 40% versus June 2020 and June 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 by week through July 18 using the same criteria:

*Compared to corresponding week in 2019 rather than 2020.

In general, the graph indicates that prices have leveled off or declined modestly in recent weeks (other than the comparatively low-volume van category).

Based on NADA data, retail used vehicle sales by franchised and independent dealers in June were up 0.7% month-over-month and 2.5% year-over-year. Year-to-date through June, sales are up 21.1% versus 2020 and 3.1% compared to 2019/pre-pandemic levels.

CPO sales were down 10.9% from the prior month and down 8.8% versus last year, according to figures from Autodata. On a year-to-date basis through June, CPO sales remain up 18.0% compared to last year and 4.3% versus 2019.

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 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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