Used retail days’ supply was estimated at 37 days in September. Normal days’ supply, which Cox estimates using data from its vAuto inventory-tracking software, is 44 days. Wholesale supply ended September at 18 days. A normal wholesale supply is 23 days.
Used-vehicle inventory levels have been faring far better than new and in fact have been inching toward normal levels as of late, Smoke said. “New inventory as of mid-September was down 75 percent compared to 2019, with days’ supply down a little less, as the declining sales pace has kept days’ supply at its bottom for the last several months,” he said.
The constraint is generally not squeezing dealers’ bottom lines. When asked about high wholesale prices pressuring dealer margins, Smoke noted that auctions represent only the most expensive method for dealers to get used cars and trucks. A typical franchised dealer sources only about a quarter of their used inventory from auctions, he said.
“So don’t worry about their margins,” Smoke said. “While they are being compressed a bit from the most recent trends, their margins are still substantially higher than what they were pre-pandemic.”
With broad consumer demand and high conversion rates, Cox forecasts wholesale prices could rise another 2 to 3 percent through October and into November.
“I also think that the odds of any price decline between now and tax season next year is extremely low,” Smoke said.
Prices could increase about 2 percent from this year’s peak during next spring’s tax refund season, he said.
Then in the back half of next year, vehicles could once again return to being naturally depreciating assets.
That said, demand will by no means collapse, Smoke added, and he noted that Cox forecast used-vehicle sales next year to be at record levels — and for 2023 to show further growth. “But the ultimate caveat here,” Smoke said, “is the assumption that the production problems do end up being behind us this quarter and start to see gradual improvement.”
