Used Market Achieved Liftoff Last Week

We have near real-time views of sales and prices, but a lagged view of tax refunds. The latest data reveal that the used-vehicle market achieved liftoff last week.

Through Friday, February 28, tax returns filed with the IRS were up slightly (0.1%), but the number of refunds was down 1.9%. The average refund was also down (0.1%). We were a bit more than 40% of the way through tax refund season as of February 28, as refunds continue to be distributed at a slower pace this year. However, once we get data for last week, we should see that the majority of refunds has been issued.

The seasonal sales jump has been slower to happen as a result of the slower refunds, but week 10 delivered. Retail used-vehicle sales jumped more than 30% last week.

After liftoff has been achieved, used-car sales usually remain at peak levels of activity for 7 to 9 weeks. That would suggest that this year’s peak demand would likely last until mid- to late-April. However, this year’s market could be impacted by COVID-19 fear and declining consumer confidence. Through last week, however, there is no sign of used-vehicle demand seeing an impact from the virus.

Consistent with the retail used sales jump, wholesale used-vehicle prices continued the spring bounce in week 10. After a 0.7% jump in week 9 on the three-year-old Manheim Market Report (MMR) Index, last week saw a jump in values of 0.9%. This continues to be the strongest start of the spring bounce since 2014.