But inventories of 2- to 3-year-old vehicles are tight because of the new-vehicle shortages 2 and 3 years ago.
By Wolf Richter for WOLF STREET.
Retail sales of used vehicles at independent and franchised dealers jumped by 8% in August from July, and by 14% year-over-year, to 1.68 million units, according to estimates from Cox Automotive.
June had been the month when a ransomware attack shut down the cloud-based dealer management system from CDK that about 15,000 dealers use to manage every aspect of their operations. On June 19, they suddenly couldn’t process sales for the rest of the month and into July. This caused the plunge in used vehicle retail sales in June. In early July, as the system came back up, they got those June sales processed, hence the big jump in July sales. The jump in August sales was on top of that.
For June, July, and August combined – which irons out the effects of the CDK software shutdown – used-vehicle retail sales rose by 5.7% year-over-year to 4.52 million units, an acceleration from the first five months of this year, when used-vehicle sales were up 2.8% year-over-year (red = 2024, yellow = 2023, blue = 2022):
Note the blue line: In 2022, retail prices of used vehicles began their historic plunge off the ridiculous spike that peaked in late 2021 to early 2022. The price drops weren’t driven by lack of demand but by more ample supply showing up and by the unsustainability of that ridiculous price spike in 2020-2021.
But now, used-vehicle inventories are tight and wholesale prices have begun to rise, on strong demand from dealers to replenish their inventories to meet strong demand from consumers, as these sales figures show.
Tight inventories have been a particular issue with two- and three-year-old off-lease vehicles and trade-ins due to the shortages of new vehicles two and three years ago. So sales of certified pre-owned (CPO) vehicles have been running below last year’s level, and were down 3.3% year-over-year in August, though they also jumped 11% in August from July, to 235,150 vehicles, according to Cox Automotive.
The big jump in volume comes in part from a “notable rise” of vehicles that were priced under $15,000, in part as more vehicles made it back into that category after two years of historic price declines from the pandemic spike, including wholesale prices at auctions where dealers replenish their inventories.
But the price declines may have run their course: Wholesale auction prices via Manheim, the largest auto auction house in the US, rose for the second month in a row in August, both seasonally adjusted (red) and not seasonally adjusted (blue):
Retail prices lag wholesale prices by a couple of months, and they still fell in August, according to the CPI for used vehicles, seasonally adjusted (red) and not seasonally adjusted (blue), having given up 60% of the 2020-2021 price spike. So clearly, the steep price declines are bringing in the buyers.
New-vehicles sales also jumped in August: +11.2% from July and +7.6% from a year ago — more than undoing the steep drop in June and the smaller drop in July, caused by the mayhem following the CDK ransomware attack. For June, July, and August combined, sales rose 0.5% year-over-year, to 4.01 million vehicles, according to data from the Bureau of Economic Analysis earlier this month, when we discussed new vehicle sales for Q2.
On Tuesday morning (September 17), the Census Bureau will report total retail sales for all goods that consumers buy, including new and used vehicles, but these are dollar-sales, not unit sales. We know that vehicle prices, particularly used vehicle prices, have come down over the past two years (deflation in vehicle prices), so the retail sales in dollars will reflect those lower prices. Then, in the next data release of inflation-adjusted consumer spending, that deflation in vehicles will boost inflation-adjusted consumer spending.
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It makes you wonder if auto dealers will once again begin to add markups for the privilege of buying a car from them. Although some never stopped.
I miss paying under MSRP but I managed to buy a car in 2023 for MSRP although I wish I hadn’t needed to and I downsized to a single car for the household.
Some dealers now list only “TSRP” or some other crap; anything to obfuscate pricing. I’d love to order online directly and know the price before spending 3 hours in an auto lot snake pit.
Auto dealers have a reckoning coming the likes of which realtors are currently seeing. I don’t know how and I don’t know when but when it happens I will just say: it’s about time.
LOL, they weren’t trying to obfuscate pricing before?
“Well, we’ve never done this before. But seeing as it’s special circumstances and all, he says I can knock a hundred dollars off that Trucoat.”
The last few years, almost *everybody* has been put through the inflationary wood-chipper.
You need to use quality brokers for your new car purchases. You get the best pricing in the country or region, and your only interaction with the FI guy is a three-minute phone call about how you’re going to fund the purchase. Almost every high volume Asian and European car is available for 8% or more off MSRP before incentives.
Check out this group on FB if you’re looking for Toyotas: No Markup Toyota Deals Nationwide
Jim is legit. It’s not a promotion. Just trying to save people a lot of money.
8%,,, LMAO!
We have purchased dozens of new motor vehicles since 1989, and have never paid more than 20% off the ”sticker.” Several times about half the sticker…
Working for a company in Warren, MI that had a bunch of ”connections” with GM AND Ford, at the company pick nick, folks from those companies, after a few favorite beverages, told me of their profit percentages, confirming long heard stuff…
”Back in the Day” according to the son of a dealer who drove with his dad to de twa to buy for cash,,, they could usually buy at less than 50%,, for cash,,,
To say there was, and likely continues to be a bunch of hokus pokus is to put the story in proper perspective.
@VintageVNvet I lived with a guy that sold cars part time as an undergrad so I don’t know as much about the car business as Wolf, but I’m pretty sure you are the exception of buying all your cars at more than 20% off since typically only cars that nobody wants sell for that much under MSRP (I bet you can get a deal on a Fisker SUV today).
I don’t know if the mark-ups are as obscene Vintage reports…but I am willing to believe that with decades and decades of technological/manufacturing process experience reducing actual production costs and the idiot inflation post 2020…that the maker profits are pretty damn absurd and essentially unchallenged by a population bred to only pay attention to monthly payments.
I have used Auto Brokers couple of times and gotten some insane deals by just paying $500 as extra fee.
I don’t mind using them.
Best bet is check out leasehackr forum and they have deals by auto brokers, or dealership direclty.
Recently, signed a lease deal for EV which cost 51K OTD. I did one pay of $3900 for 2 year 20K lease. Found dealership deal in lease hackr
DWRE:
There is no “dealer buying experience” like the Tesla buying experience. it seems from your post it is exactly the experience you are looking for.
Thanks but the price for a Model Y is more than an ICE RAV4 and I don’t qualify for the federal tax credit. The 2% financing is nice though.
TCO? No oil changes, no timing belt, no gasoline? More tires, maybe more break pads and shorter lifespan?
The credit is point of sale and the IRS will not recapture if it exceeds your liability….from the IRS website:
Q4. What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)
A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer’s regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.
These cars aren’t cheap, but $7500 off is still a big deal. Other than a $250 order fee (on new ones, not used) they just pass through the tax, reg and title costs.
MW: Bets on wild stock-market swings boom as traders face most uncertain Fed rate decision in recent memory
Investing: Retail Sales Show Surprise INCREASE, Defying Negative Forecast…
https://wolfstreet.com/2024/09/17/recession-not-yet-retail-sales-help-push-up-atlanta-fed-gdpnow-to-3-0-for-q3-gdp-our-drunken-sailors-arent-backing-off/
Wolf, I appreciate this real info I often watch “Car Questions Answered” and “Lucky Lopez” (less so the latter). They are quite the doomers. Have you ever seen any of their videos?
I’m in the market for a used car for a new driver, so under $20K. This article tells me to get off my butt and (heh, heh) get in gear.
Thanks.
If you are considering purchasing a used car it is best to do some serious research and then shopping on the internet while you are narrowing down the choices as to what you are interested in buying. Cars depreciate at very substantially variable rates and finding your most desirable color combinations on a vehicle is often not an easy task. Depending on whether the car is a highly desirable class take a look at BringATrailer and CarsAndBids to see the going price ranges for the vehicles you like there. Don’t expect to find a highly desirable Ferrari or BMW just sitting as a used car on some local dealer’s lot. Thanks to the internet you can now easily show the entire US markets for what you finally select as a used car model to purchase.
@SoCalBeachDude, @SandyEggan said he was in the market for a “used car for a new driver” not a toy car (BringATrailer and CarsAndBids are for toy cars and/or fun expensive daily drivers for rich people – you can bid on a RR SUV that cost over $300K new today on BaT – or just look at the “car porn” photos like I do before going out to my Toyota Landcruiser). My advice for anyone getting a “used car for a new driver” is get a Honda, Toyota, Mazda or Subaru. Get the nicest one you can find for what you want to spend knowing that if you have problems with it it is always easy to sell a Honda, Toyota, Mazda or Subaru in a week on Craigslist (harder to sell a Mitsubishi, Kia, Hyundai or Fisker)…
I would suggest that if you want an excellent quality car that one should buy a BMW regardless of their status as driver. That’s the only make I drive these days and have 4 of them.
That’s silly. Why not just take the private jet or have one of the buttlers from your emptiest mansion chauffer you?!
lol @ bmw is “excellent quality”
nothing wrong with buying a car that impassions you .. but the magnitude of money pit that BMW will be depends on which models you chase, how dirty you are willing to get replacing your own parts, and luck-the-draw on when any given set of gaskets, bushings, or hoses are going to dissolve
It was actually easier to buy a high line luxury suv than to find a small compact suv for my niece at this time.
I feel sorry for anyone in the 10 – 15k bracket it appears to be a lot of junk and high mileage cars that are worth next to nothing and most likely big headaches for their next owners.
@Kracow this has been my experience looking in the 10-15k bracket. Considering going a little higher.
Color and minor dings are fine. It will get it’s share of abuse.
But I’ll keep looking. Some choices we don’t get to put off.
Dude I’m geared up for this fed rate cut like it’s Super Bowl Sunday!
🍿
We going .25 or big time at .50???
Where’s the evidence that auction prices correlate with price of cars sold to the public? Hasn’t there been times where auctions prices have been low, and price sold to the people have been high?
The article has 2 graphs which show auction prices & retail prices moving in near lockstep for 7 years.
Selling a 2007 Chevy Silverado for $7000 (200,000 miles on odometer). Buying a 2018 Chevy Silverado for $14,000 (180,000 on odometer). Florida has the best prices on used full sized pick up trucks that have not seen the rust belt. Living on the front range in Colorado insurance skyrocketed, the hail storms reck havoc, I don’t need a $80k new truck to keep my sanity.