September/October 2022 Kontos Kommentary
The following commentary is produced by Tom Kontos, Chief Economist, ADESA Auctions.
Summary
Average wholesale used vehicle prices in September were down for the fourth month in a row from their spring/tax-refund seasonal peaks in May, but at a more gradual pace than that seen in the three prior months. Hurricane Ian possibly had a moderating effect on wholesale price deterioration, due to the loss of used vehicle supply and the resulting replacement demand the storm generated. This moderating trend continued into October.
Lack of affordability and availability are hampering used vehicle retail sales, leaving dealers with more inventories, and prompting them to be more selective in their inventory sourcing. This is also evidenced by lower conversion rates at auction.
Wholesale Market Trends
According to ADESA US Analytical Services’ monthly analysis of auction industry used vehicle prices by vehicle model class, wholesale prices in September averaged $15,543—down 1.3% compared to August, flat relative to September 2021, and up 39.3% versus pre-pandemic/September 2019, as seen below.
Average prices continued to soften in October and stood at $15,282 for the week ending October 16.
Further insights on wholesale price trends can be gained by holding constant for auction sale type, model-year age and mileage (the upper line in the following graph), as well as price trends for all vehicles sold (the lower line in the graph below). Prices continued to fall for both groups from their spring/tax-refund seasonal peaks, although the drop for the late-model units shown in the top line has been more precipitous.
A spreadsheet with historical data broken out by model class for the table and graph in this section has been provided with this report for your convenience in tracking these trends going forward.
Retail Market Trends
The following graph and table summarize data on retail used vehicle and certified pre-owned (CPO) sales through September based on ADESA US Analytical Services analysis of data from NADA and Motor Intelligence, respectively.
As the graph shows, September and year-to-date retail used vehicle sales were down by double-digits versus 2021 and 2019. The table also shows CPO sales, which similarly showed double-digit year-to-date declines compared to last year and pre-pandemic/2019. Average auction conversion rates have fallen to under 60% as a result of slow retail sales, as dealers become more selective when adding to their inventories.
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