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The wholesale used-vehicle market ended the third quarter with some stability, but the duration of that steadiness likely hinges on how the United Auto Workers strike unfolds. Wholesale Door Closer
As one analyst put it, the used-car market has reached a “crossroads.”
That’s the state of affairs illustrated by the monthly used-car price indices released this week by Black Book and Cox Automotive, respectively.
Black Book’s Used Vehicle Retention Index for September came in at 159.3, down 1.8% from August and down 9.7% from a year ago. The index is 39% higher than March 2020 pre-pandemic levels.
“The UAW strike that started last month is having an effect on the wholesale market: there was a noticeable improvement in the conversion rate at the auctions and wholesale prices stabilized (and in some segments increased) by the end of September,” Black Book chief data science officer Alex Yurchenko said in a news release.
“After a heavy depreciation during the summer months, the wholesale market started to show slower depreciation as dealers stocked up on some inventory to prepare for the potential of a prolonged strike,” Yurchenko said. “We expect the used market to be in the wait-and-see mode for at least next several weeks as the strike continues.”
Over at Cox Automotive, the company’s Manheim Used Vehicle Value Index came in at 214.3 for the month, down 3.9% from September and up 1% month-over-month, when adjusting for mix, mileage and seasonality.
“We saw a very different third quarter compared to the second quarter with the used-vehicle market swinging back and regaining a sense of balance,” Cox Automotive chief economist Jonathan Smoke said in a news release. “What has been behind this improving dynamic for used-vehicle values is improving retail vehicle demand, which tightened retail supply and led to more dealers buying at wholesale.
“Early September carried the momentum from August but quickly leveled out, and the month ended about as we expected. The fourth quarter may still have some hurdles to overcome, notably the United Auto Workers strike, but we expect the rest of the year to remain stable.”
In presentation slides Friday, Cox Automotive said it anticipates the year to close with December’s reading of the Manheim index down 2.2% year-over-year.
Originally, Cox was forecasting a 4.3% decline.
Looking forward, Cox Automotive senior manager of economic and industry insights Chris Frey said: “We are at a crossroads for wholesale, mainly from concerns about the UAW strike potentially slowing new retail sales and moving buyers into the used market.
Auto Close Hinge “We don’t see that happening just yet, as it always takes time for changes to work through the market. Two very different outcomes are possible. One is to see higher prices from an extended strike on new production also showing up at wholesale and then used retail,” Frey said. “The second leads to very little change — a quick strike resolution leading to price declines at relatively normal rates, or simply pausing, thus the wholesale and used retail markets are minimally affected.”