You don’t need to look far to realize that used car prices have been incredibly volatile over the past few months. Amidst the ongoing global COVID-19 pandemic, many aspects of life have changed, and the automotive industry has been no exception. Over the past few months we’ve seen supply shortages, once in a lifetime manufacturer incentive deals, and used car prices that defy reality.
It goes without saying that 2020 will certainly be a year we never forget for myriad reasons.
To better understand the true impacts the past few months have had on used car prices, the team over at iSeeCars.com, led by Julie Blackley, conducted a research study on used car price changes. Their findings? Both surprising and telling. A lot of vehicles have seen their values increase, while a select few have actually gone down in price (who would have guessed).
We highly recommend you take a look at the full report here, but in the meantime, we’ve distilled some of our favorite insights for you. Without further ado, let’s dive in.
Used car prices increased 4.1% in August
Without a doubt, the biggest headline to come out of the iSeeCars report is the fact that used car prices increased a little more than 4% in August from the month before. Year over year we saw an increase in used car sales for the month of August of 4% as well.
That means that 4% more used cars were sold in August of 2020 than in August of 2019, and on average car buyers paid 4% more in August of 2020 than they would have in July of 2020. As used car prices increased, so did car buyer’s appetite to purchase them, evidently.
At the root of this dynamic is supply and demand. Data from Cox Automotive’s Manheim Auction unit suggests that dealers currently have a 33 days’ supply of used cars on their lot right now. A year ago, this number stood at 43. With less supply, we have seen prices increase on both the retail and wholesale side of the industry.
Unprecedentedly we heard from the CEOs of multiple publicly traded automotive retailers saying that they could not find enough supply to meet customer demand.
It’s clear why used car prices increased by 4% in August when you take into consideration all of these factors.
Some used cars saw small price decreases
August was not all bad news for used car prices, there were a few vehicles that decreased in price from July to August. If you were (or are) in the market for a subcompact vehicle, you should have seen prices decline.
|2||GMC Yukon XL||$42,317||-$811||-1.9%|
|4||Ford Fusion Energi||$16,844||-$313||-1.8%|
|8||Hyundai Elantra GT||$13,906||-$150||-1.1%|
SUVs and Pickups saw the largest increases in price
Unsurprisingly, SUVs and pickups led the charge in increased prices for the month of August. In total, 14 different SUVs experienced 5% increases in their average used car retail price from July to August.
|1||Land Rover Range Rover Sport||$51,502||$4,226||8.9%|
|2||Lexus RX 350||$35,055||$2,707||8.4%|
|3||Land Rover Discovery Sport||$28,839||$2,121||7.9%|
|5||Land Rover Range Rover Evoque||$29,866||$1,961||7.0%|
6 different pickup trucks experienced more than a 5% increase in price as well.
|5||Chevrolet Silverado 1500||$32,609||$1,656||5.3%|
|6||Ram Pickup 1500||$31,079||$1,552||5.3%|
As demand for SUVs and pickup trucks continues to stay high, prices on the new and used car market for either type of vehicle are elevated. A recent Edmunds study on 3 year vehicle retention even showed some pickup trucks retaining 75% of their value after 3 years of ownership. Used SUVs and pickups are expensive relative to sedan, coupe, and other peers.
Wholesale used car prices have started to decline
If you’re contemplating purchasing a used car in the not too distant future, have no fear, there is light at the end of the tunnel. Over the past few weeks we have seen wholesale used car prices begin to decline off of their unsustainable record highs.
For the week ending August 23rd, Cox Automotive saw wholesale used car prices decline .7%, the first decline in wholesale used car prices in many months. It appears the peak of used car prices has been reached.
Interestingly, it is expected that used car prices will swing drastically in the other direction (become cheap) in the not too distant future. Many factors, such as forbearance, repossessions, rental company de-fleeting should increase used car supply considerably as we enter into 2021. Increased demand for used cars is also expected to continue, as more consumers want personal vehicles for transportation amidst a COVID-19 world. However, with the end of government benefits (unemployment and stimulus), it’s hard to gauge what buying power these consumers will have, and if their demand will be enough to prop up used car prices.