Inflated used vehicle costs have begun to fall at the wholesale level, implying that customer demand may also have declined, due to higher interest rates, higher average monthly payments and economic uncertainty, especially for more price-sensitive customers.
“The basic explanation for why the weakening of wholesale values is weak retail demand as a result of customer caution in an inflationary and dubious economic environment,” Tom Kontos, lead economist at ADESA Auctions, said in a recent note.
For consumers, retail prices of used cars remain high, analysts say. But retail prices ultimately deserve to reflect wholesale prices, as dealers may charge less for used cars that charge them a little less.
To ADESA Auctions’ knowledge, the average used vehicle sold for $15,254 in October at a wholesale broker auction, the newest full month available. Value decreased compared to last month without delay.
However, the average value of wholesale auctions is still 37% higher in October than in October 2019, before the pandemic, ADESA said.
Retail sales of used cars are down because new vehicle sales are low. Fewer new vehicle sales mean fewer trade-offs.
In a typical business cycle, car sales decline because demand declines. In the current cycle, new vehicle sales have declined because new vehicle production has been unable to meet demand. This is due to a shortage of PC chips and other supply chain issues. , is not a lack of convocation.
Auto industry analysts are watching closely to see if peak costs and maximum profits can be maintained, if the source improves and if demand falls. This is for new and used vehicles.
Cox Automotive estimates that the average interest rate on a retail used vehicle loan will be around 16. 3% in December, up from 14. 3% in September 2022 or 12. 6% in September 2019. At the same time, the average monthly retail payment would increase to $567 in December, up from $551 in September 2022, an average of $387 in September 2019.
The used vehicle market still has “a lot of vitality,” Chris Frey, Cox Automotive’s senior director, Economic and Industry Insights, said in a presentation on third-quarter auto results. However, he said, “average increases in interest rates have a greater impact on the market than previously thought. “