In its mid-month report for March, Cox Automotive found consumer sentiment in the used car market continued to improve as coronavirus (COVID-19) vaccines became more numerous. At the same time, wholesale prices dealers paid for previously-owned cars and trucks moved sharply higher.
“We see improved momentum in overall used-vehicle sales starting in February and continuing through March,” the analysts wrote. “Going into 2021, we expect the certified pre-owned (CPO) market to resume its consistent performance of annual growth after a dip in 2020. CPO sales rose 4 percent month over month in February.”
But the prices dealers are paying continued to rise. The seasonally adjusted Manheim Used Vehicle Value Index increased 3.7 percent when comparing the first 15 days of March to the month of February. The non-seasonally adjusted monthly change was 5.5 percent higher.
Consumer prices are also higher
The used-vehicle prices that consumers pay have also increased every week in March. Jonathan Smoke, chief economist at Cox Automotive, says that trend is likely to continue for a while.
"With spring in the air and cash in pockets, consumer demand is driving prices to new record levels,” Smoke said. “Last week saw an acceleration in wholesale prices equivalent to the fastest pace of increase in early June last year. We are expecting to see records on the Manheim Index each month this spring.”
In part, prices are being driven higher by supply and demand. The Cox Automotive report shows inventory in the used-vehicle market fell to a 48-day supply in February. The supply of unsold used vehicles totaled 2.59 million at the end of February, down from 2.66 million vehicles in January.
Well below last year
The decline in inventory is even more pronounced when compared to February 2020, just before the pandemic hit. There were nearly 3 million vehicles on used car lots then, 12 percent more than last month.
While the Cox Automotive report did not document the same drop in inventory in the new car showroom, the shortage of vital computer chips could soon change that equation. General Motors is suspending midsize truck production, shutting down its Wentzville, Mo., assembly line for two weeks starting March 29.
The Wall Street Journal reports the chip shortage is already being felt in dealer showrooms, reducing the number of vehicles for sale. Dealers told The Journal they have plenty of buyers but fewer new vehicles to sell.