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

Summary

After cracking the $14,000 mark for the first time ever in April, average wholesale used vehicle prices broke $15,000 in May.  However, prices appear to have softened mildly from those peaks so far in June, and lower auction conversion rates (vehicles sold as a percent of vehicles offered) further indicate that dealers may have become more selective in their purchase decisions as their used vehicle inventory levels have improved.

Retail used vehicle and CPO sales were strong in May and are up year-to-date versus 2019/pre-pandemic levels, providing strong wholesale demand and good retail gross profit potential for the ongoing tight supply of used vehicles.

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in May averaged $15,001 — up 3.9% compared to April, up 26.5% relative to May 2020, and up 28.6% compared to pre-COVID/May 2019 as seen in the table below.

Trends at the segment level closely follow overall trends, indicating a consistency in demand across all vehicle categories, including the car segments that in years past were underperforming trucks. This “parity” in price performance had been anticipated in pre-pandemic editions of this report as truck supply, especially from strong new vehicle sales of smaller SUV/Crossovers, was expected to catch up with demand while car supply was expected to shrink.

When holding constant for sale type, model-year-age, mileage, and model class segment — using criteria that characterize off-lease units — prices in May were up by over 50% on a year-over-year basis versus May 2020 and by over 40% compared to May 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 June 20 using the same criteria:

*Compared to corresponding week in 2019 rather than 2020.

As the graph shows, average prices have been well above pre-COVID levels each week since the start of the year, regardless of vehicle type.  Other than the comparatively low-volume van category, there does appear to be some mild tapering in the rate of increase versus comparable weeks pre-pandemic.

Based on NADA data, retail used vehicle sales by franchised and independent dealers in May were up 3.3% month-over-month and 10.2% year-over-year. Year-to-date through May, sales are up 27.1% versus 2020 and 2.6% compared to 2019/pre-pandemic levels.

CPO sales were up 4.7% from the prior month and 12.8% versus last year, according to figures from Autodata. On a year-to-date basis through May, CPO sales are now up more than 25% compared to last year and more than 5% 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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