Ever heard the phrase ‘patience is a virtue’? In the world of used car buying, it’s more than just a virtue – it’s a strategy. With recent fluctuations in used car prices, knowing when to dive into the market can be the difference between an okay deal and a fantastic bargain. But when will car prices drop? As it turns out, the answer lies in understanding the data behind the trends. We’ll unpack the latest used car market update to reveal why the smartest buyers might want to play the waiting game.
Wholesale Used Car Prices Are Falling at a Record Pace
The latest numbers from Cox Automotive are making headlines. In June, wholesale used car prices dropped by -4.2%, with an overall decrease of -10.3% compared to the previous year. June’s decrease was an all-time record for the month, and is second only to the pandemic plunge in car prices during April of 2020.
Here’s where some of the headlines are missing the point: the sharpest declines are being seen at wholesale auctions. These are the auctions that the dealers themselves buy from, not where the average consumer will find their next ride. Surely wholesale price trends will be mirrored in retail prices quickly, right? Not so fast.
On the retail side, the used car price decreases have been more modest. Retail used car prices fell by just -0.5% over the last month, revealing an unsurprising mismatch between wholesale and retail trends. Let’s dig a bit deeper into that…
Understanding the Lag Between Wholesale and Retail Prices
But why does this gap between wholesale and retail used car prices exist? Simply put, retail prices typically lag behind wholesale trends. This is due to the time it takes for changes in the wholesale market to trickle down and affect retail prices. Dealers want to squeeze every possible dollar out of their inventory, so it takes a while for market trends to finally be reflected in sticker prices (and negotiability).
Therefore, if you’re planning to buy a used car, it’s likely worth waiting 30, 60, or even 90 days. The drastic declines in wholesale auctions seen today will likely translate to better retail prices in the coming months.
Why not now? Consider the following: We track used car prices weekly here with the help of Black Book. In the graph below, you can clearly see the marginal price movement on the retail side of the market. Retail used car prices in fact remain above where they started 2023.
In this next graph from Black Book, we see the more noteworthy price declines on the wholesale side.
Before you head to the dealership, know this: retail car prices typically lag behind wholesale price trends by one to three months. To save the most on your used car, we recommend waiting 30, 60 or 90 days for retail prices to really come down.
Rushing out to dealer lots today could cost you, as dealers today are very likely to ‘play dumb’ and hold off on lowering prices for as long as they can.
The Impact on Trade-In Values
These changes don’t just affect buyers; they also have significant implications for those looking to sell or trade in their vehicle. The most immediate impact of falling used car prices is a decrease in trade-in values. If you’re certain about selling or trading in your car, it’s wise to complete the sale as soon as possible to get the best value.
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Retail Sales and Used Car Inventory
These price trends come alongside a decrease in retail sales for June and a continued rise in used car inventory. ‘Days supply,’ a common industry metric used to compare inventory while also factoring in the daily sales rate, continues to climb for most used vehicle segments. This means that more cars are available, but they are also staying on the lot longer.
Interestingly, the major vehicle market segments saw their seasonally adjusted prices remain lower year over year in June. Compared to June 2022, pickups and vans have fared better than most, losing 6.6% and 8.5% respectively. Sports cars took the hardest hit at 14.8% year-over-year, while compact cars lost 12.6%, and midsize cars dropped by 12.2%. When compared to last month, all segments were down, with compact and midsize cars experiencing the most significant declines.
The Dealer’s Dilemma: Cash Crunch and Inventory Overload
The rapid fall in used car prices has put car dealerships in a tough spot. Dealers (and their lenders) are under a significant cash crunch. You’re not the only one borrowing money for your next car. Dealers themselves have to pay interest for every day a car sits unsold on their lot, creating a time-is-money dilemma. Car dealerships typically take out loans to purchase inventory at auction, and then pay interest on that loan until the car is sold. This hidden expense is called ‘floorplanning costs’, and they’re rising for dealers in a time of interest rate hikes.
They desperately want to make the most money possible from the sale of each car on their lot. This is their path to profits. However, quickly-changing market dynamics are throwing a wrench in their plans. As used car values fall quickly, dealers are finding themselves in a precarious situation.
Used Cars with the Most Inventory Today
Using the market analysis tools available through CarEdge Data, we identified the ten mainstream used cars with the MOST inventory today. These are the used cars that you’re more likely to negotiate a better deal with today.
|Make||Model||Days Supply||Total For Sale||Sold (45 Days)|
|Jeep||Grand Cherokee WK||155||947||275|
|Jeep||Grand Cherokee L||113||3653||1451|
Are there really any surprises here? Trucks can’t sell right now, and just the other day we did a deep-dive into Jeep’s unprecedented glut of inventory.
In the weeks and months ahead, we fully expect to see more models reaching over 100 days supply on the used car market. Electric vehicles and trucks are piling up on dealer lots as we speak!
Used Cars with the Least Inventory Today
Negotiating will be tougher with these models in short supply. Note that this list is full of vans and SUVs. These family haulers remain in demand, but the good news is that van and SUV prices have fallen more than the overall market average in recent months. Follow our weekly used car price updates here.
|Make||Model||Days Supply||Total For Sale||Sold (45 Days)|
There’s more money-saving data where that came from! Try CarEdge Data today to unlock the auto market insights dealers don’t want you to see.
In Summary: Patience, My Friend
While the current market might seem chaotic, let’s not forget that “patience is a virtue”. As we’ve seen, smart car buyers will benefit significantly from holding off for the next 30 to 90 days. This brief period of waiting will yield better deals and greatly increased negotiability as dealers become eager to offload their inventory. It’s not about being lucky – it’s about being patient and strategic.
To navigate the changing used car market, consider getting expert help from CarEdge. Our CarEdge Data plan provides you with up-to-date, behind-the-scenes market insights that can help you seize the best opportunities. Featuring the latest Black Book vehicle valuations, CarEdge Fair Price and official recommendation for every listing, and three CarEdge Reports per month, you’ll have the tools you need to secure a great deal.
Likewise, a CarEdge Coach can guide you through the process, ensuring you’re equipped with the knowledge and confidence to make the most out of your car buying experience.
Remember, the savviest of car buyers follow the data, not the headlines. Stay patient, stay informed, and get ready to snag that excellent deal on your dream used car soon!