Used car prices are falling but likely to recover soon, based on data from a shopping website and the leading auction house that dealers use to buy used vehicles wholesale before retailing them to customers.
Sales of all types of used vehicles collapsed in April as unemployment, widespread auto sales bans and economic and health insecurity ravaged the country.
April used car sales fell 34.4% from 2019, according to Manheim, which runs used car auctions all over the country. The dealer-only auctions allow companies to sell retired fleet vehicles, models coming off lease and vehicles they take in trade to other dealers who think they can sell them.
Wholesale prices for used cars fell 11.4% in April, but began to recover late in the month, according to Manheim’s figures. The auctioneer’s inventory was up 40% by mid-April. Manheim furloughed more than 6,000 employees because of the slowdown.
Similarly, auto research website iseecars.com reports used cars took longer to sell in March, leading dealers to cut prices on them.
Dealers and auction houses already are trying to manage used-car supplies to support prices, and a shortage of new vehicles following COVID-19 assembly plant shutdowns could boost used prices, so the deals are unlikely to last through the summer. Some sellers at auction have begun setting minimum prices below which they won’t sell a vehicle.
In Detroit, the number of used cars that sold within 30 days on dealer lots fell from 54.1% in February to 44.5% in March, a decrease of 9.6 percentage points, according to iseecars.com, which studied 1.8 million used vehicles listed for sale from Feb. 1 to March 18. The national average decreased 9.8%. Among the 20 largest U.S. metro areas, New York City fared worst: after 49.9% of used cars sold within 30 days in February, just 33.3% found customers that quickly in March.
Interest costs can be a back-breaker for auto dealers, which often finance their inventory purchases with loans. A few extra weeks on the lot can be the difference between a profitable sale and a big loss.