The month of October saw American car dealers grapple with a lingering challenge in the form of approximately 2.26 million unsold vehicles, reflecting an 8% decline compared to the same period last year. In the context of current sales rates, this inventory represents a mere 47-day supply of used cars, notably falling short of the customary 60-day target that dealers aim to maintain in stock.
A National Quandary of Limited Inventory Despite a slight improvement since the nadir experienced in early April, the overall volume of used vehicles available for purchase has remained frustratingly limited, hovering consistently within the range of 2.2-2.3 million for the past four months. Chris Frey, the senior manager of Economic and Industry Insights at Cox Automotive, observes this persistent challenge. It’s essential to note that Cox Automotive is the parent company of Kelley Blue Book, a prominent industry resource.
Price Implications of Scant Supply These meager supplies have direct consequences for pricing dynamics. While there was a slight price dip in August, analysts anticipate that it may be of short duration. Notably, wholesale prices, which dealers pay at auctions for used vehicles they later sell, began an upward trajectory in late August following several months of declines. It’s a well-established trend that changes in wholesale prices eventually translate into changes in retail prices, typically within six to eight weeks.
Pandemic’s Long-Term Influence on Supply Analysts at Kelley Blue Book foresee a continued period of elevated used car prices in the coming years, primarily due to the pandemic’s far-reaching impact. The pandemic-induced reduction in automotive production resulted in approximately 8 million fewer cars produced. Consequently, used car inventories are anticipated to remain constrained for a prolonged period, keeping prices at levels unfamiliar to American consumers.
The Price Segment Paradigm A noticeable pattern is emerging concerning price segments; lower-priced used vehicles face the tightest inventory constraints. For instance, used vehicles priced under £8,000 had an inventory supply of just 32 days, with the supply duration increasing progressively for higher-priced segments. The over £28,000 category boasted the highest supply duration of 58 days.
Noteworthy Brands and Their Inventory Status Examining specific non-luxury brands, Honda, Mazda, and Toyota emerged with the most limited inventory of used vehicles through September. Honda possessed a 39-day supply, while Mazda and Toyota both had a 40-day supply. In contrast, most other mainstream brands, encompassing both luxury and non-luxury categories, managed to maintain their used-vehicle supply within a range of under 50 days.
