Used-Vehicle Supply Low, But Stabilizing

The inventory of unsold used vehicles remains low but appears to be somewhat stabilizing in contrast to new-vehicle inventory that continues to fall, according to a Cox Automotive analysis of vAuto Available Inventory data.

The total U.S. supply of unsold used vehicles stood at 2.16 million vehicles at the start of this week. That is the lowest level in years and compares with 2.67 million vehicles in the same week a year ago. As a result, the national days’ supply of unsold used vehicles is around 33, down from 43 a year ago, which is closer to the traditional average. The days’ supply has been hovering in the 32 to 35 range since mid-June.

Demand for used vehicles is strong, and the usual supply sources for them have been disrupted, causing a drawdown of inventory. As of last week, used-vehicle sales were less than 3% off the same week a year ago; new-vehicle sales were about 22% behind the pace of a year ago. In some weeks this year, used-vehicle sales have actually been higher than they were a year ago.

“Used-vehicle demand has been strong since March’s massive COVID-19 market shock,” said Cox Automotive Senior Economist Charlie Chesbrough. “The paycheck protection stimulus program seems to have provided many used car shoppers the ability to purchase.”

The program has also delayed many loan defaults and vehicle repossessions that provide an ongoing supply of vehicles to the used market, Chesbrough added.

In addition, weak demand in the new market means fewer trade-in vehicles that would be sold as used vehicles. “And, the peak of the new market hit in 2015 and 2016, many years ago in terms of vehicles. So there just aren’t as many gently used vehicles available,” he said.    

The supply crunch may now be stabilizing as strong used-vehicle sales growth from the peak of the pandemic moderates and the new-vehicle market improves to support more trade-in activity.

Average Used-Vehicle List Price Sets Record

Budget-constrained consumers choose used vehicles instead of new as the most economical option, but prices are rising due to high demand and low supply. The average used vehicle listed at a record $20,212 last week, the second week in a row the average listing hit $20,000. By comparison, the average listing a year ago was $19,295, and, the week of March 23, the average used-vehicle list price bottomed at $18,681. Valuation analysts at Kelley Blue Book reported the estimated average transaction price in July for a new light vehicle in the United States was $38,378.

Used vehicles that listed at under $10,000 had the lowest inventory with 25 days’ supply. Vehicles that listed at over $35,000 had the highest at a still-low 40 days’ supply. All other price categories had days’ supply of 32 to 34. Even at the higher prices, used vehicles are selling fast.

The shortages are primarily across the board with mainstream brands. Toyota again had the lowest inventory of used vehicles closely followed by Lexus and Ram. All had under a 30 days’ supply.