Lanzavecchia said used-car prices have fallen partly because they have “reached a peak” where prices could rise. Some used cars have sold for over 100% of her on the sticker, which is an unusual situation, she said with a laugh.
“There was no room for growth,” she said.
Lanzavecchia said cars are still in a “one-in-one-out” situation, where what is produced is sold quickly, but some automakers have been able to improve production. doing.
New car supply hit a low 26 days ago in 2022, but is now up about 40 days, Robb said. However, it is below pre-pandemic 90-day supply.
Robb said that when the industry is broken down by manufacturer, the supply situation is “quite different” from these macro numbers. Some brands were above the industry average, while others were well below.
Lanzavecchia said he believes interest rates are the biggest contributor to the decline in used car prices. Low incentives for automakers lead to higher monthly payments, she said.
If demand weakens, prices will fall and incentives will increase, Yurchenko said. Lanzavecchia said an improvement in new-car inventories would soften used-car prices, slowing economic growth.
But JD Power expects incentive spending to remain below 5% of stickers until around the second half of 2024, Lanzavecchia said.
Rob said automakers may supply car rental companies and fleets before resorting to incentives. From late 2022 to early 2023, Yurchenko said car rental companies are unlikely to receive significant discounts from automakers.
The supply of used cars will also continue to be constrained, and prices may continue to rise.
Leasing net worth is soaring—vehicles are worth more than what lessees pay for them at the end of the lease—preventing off-lease vehicles from going to auction.
“They all withered away,” Rob said. Either the customer or the dealer purchased the vehicle at the end of the lease, he said.
“It’s a good deal for everyone,” he added.
The 2019 model year leased vehicles had an average of $7,970 in positive equity through the week of November 12, 2022, Cox said. His three-year lease on the 2020 model, which matures in 2022, has averaged $8,536 in positive capital so far this year. But stocks have fallen as the year progressed. Vehicle leases that ended the week of November 12 on 2019 model years returned $6,029 in positive equity, while leases on 2020 models that ended that week carried $5,598 in positive equity.
Robb said Cox feels the trend of off-lease vehicles not appearing at auction will continue until positive equity drops to an average of $2,000 to $2,500.
“It would move the needle like a little bit,” Rob said.
Corporate buyers are also eager for new cars, and few models are available for sale on the used car market.
Yurchenko said rental companies probably received only half of the inventory they needed. He added that this would continue “at least” for the next six to eight months.
Yurchenko said the shortage of rental supply will affect the used car market. He said such a car was one of the earliest to be sold, but that sales volume would not recover for the next two to three years.