Used Car Prices Jump in February After Months of Decline

After falling steadily for the past 6 months, used car prices ticked up in February, rising 4.3% from January — the biggest February jump since 2009, when prices rose by 4.4%. 

The sales conversion rate, which measures the ability of dealerships to convert leads into concluded sales, was also up to 64.3%, which gives sellers more power to set prices in the market. By comparison, the sales conversion rate is usually in the 50% range in a normal month.

However, prices were still down by an average of 3.9% compared to prices a year ago. In a report from Cox Automotive, “All eight major market segments continued to see seasonally adjusted prices that were lower year over year in February. Pickups had the smallest decline at 3.9%, with compact cars, midsize cars, and vans losing less than the overall industry year over year. Luxury cars, SUVs, and sports cars lost 10.1%, 8.6%, and 7.4%, respectively, compared to last February.” 

So while things have cooled from a year ago, all eight market segments rose between 3.3% and 5.9% this month. 

New cars go opposite

Conversely, new car prices dipped for the month, with average transaction prices falling 1.7%, which works out to $705, compared to January sales.  

“The transaction data from February indicates that prices continue a downward trend at the beginning of 2023,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive. “Both luxury and non-luxury prices were down month over month, but new models, richer product mix and limited discounting are contributing to elevated prices.” 

That may be why more buyers chose to act in February. Per Cox’s reporting, February new-vehicle sales rose by 9.1% compared to January. 

One area that is truly booming is fleet sales. According to Cox and the Manheim Market Report, “Combined sales into large rental, commercial, and government fleets increased 48% year over year in February. Sales into rental fleets were up 77% year over year, sales into commercial fleets were up 23%, and sales into government fleets were up 42%.” 

With rental fleets restocking, the high prices of car rentals that have prevailed over the last few years should start to come down again. 

Paying more

Part of the puzzle of the used car market is that retail sales conversions were up, but overall sales were down 5% from January and 9% year-over-year. That means fewer people were buying used cars, but those who did paid more for them. With new car prices seemingly coming back to normal levels as supply chain pressures ease and the pent-up demand from the pandemic is slaked, the entire automotive market could be returning to something like normal. 

Alternately, and perhaps a little pessimistically, consumer confidence in the larger economy is shaky. According to The Conference Board Consumer Confidence Index, people believe things are steady for now, but lack confidence in the near future. 

“Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, senior Director, Economics at The Conference Board. 

“While consumers’ view of current business conditions worsened in February, the Present Situation Index still ticked up slightly based on a more favorable view of the availability of jobs. And, while 12-month inflation expectations improved…consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates. Fewer consumers are planning to purchase homes or autos.”

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• Source: https://www.thedetroitbureau.com/2023/03/used-car-prices-jump-in-february-after-months-of-decline/