When the used car market is unstable, people want a car that will last long and will hold its value no matter what the future holds.

People want Camrys. 

The market has been so unpredictable for a year now that dealerships and the general public alike are more comfortable with a safe bet.

So what’s the safest bed? A Camry.

In fact, used mid-sized cars in general are selling the best in the current kangaroo market.

You know the ones: Malibu, Altima, Accord, Avalon

According to the Conference Board Consumer Confidence Index®, consumer sentiment around vehicle buying conditions hit the lowest level so far this year in May, but remains higher than this time last year. 

And much like with the general car-buying public, car dealers have a similar sentiment. According to the monthly Cox Automotive industry survey, dealerships aren’t really expecting the market to go up or down. That doesn’t necessarily mean everyone expects the market to hold, we’re just not not sure which way it’s going to go and how fast. 

When it comes to the economy-priced reliable mid-size cars in the used car market, we’re seeing a continued trend of higher sales, higher relative prices, lower inventory and, lower depreciation.

Used Prices Hold Into Summer 2023

Last month we reported the used vehicle listing price at just under $27,000. That’s up to $27,256 heading into last month. We certainly don’t expect to see big price gains for used cars in these summer months, but holding prices is a good sign during a season that usually sees drop-off. 

May 2023 used car sales (the most recent data) on the other hand are down compared with both April of this year and May of 2022. Early returns from June seem to show a slight uptick in retail sales similar to March sales numbers. 

Here’s what Cox Automotive’s senior manager of Economic and Industry Insights Chris Frey has to say about used vehicle sales going into July:

“The retail used-vehicle story is still being influenced by inventory, which is near the lowest point in our data set, which goes back to 2019. The tight inventory is holding prices higher, but our team also believes that high interest rates and elevated retail prices are hurting demand. Wholesale prices have been coming down in recent months, which likely means lower retail prices are on the horizon.”

As it stands, there are still fewer recent used cars — “new” used cars if you will — because of the pandemic production shortages and economic slowdowns. 

Similarly, fleet companies were flipping fewer lightly used cars into the mused car market. So more recent models of used cars are in higher demand, while some folks are settling for slightly older used cars because there is a shortage in more recent year models. 

Wholesale used car prices are slipping, but because of the inventory issues listed above, retail used car sale prices could continue to hold. 

New Cars Becoming More Affordable (but only a little)

New car sales dipped this month as inventory hit a year-year high, about 825,000 available new cars more than this time last year.

And thankfully, we’re seeing the average new car listing price slip a little as manufacturer incentives continue to tick up. 

Manufacturer incentives continued to rise to nearly $2,000 per transaction as brands try to move this extra inventory in the face of decreased demand. 

Here’s what Cox Automotive senior economist Charlie Chesbrough had to say about the weird month:

“The month of May ended on a slightly less positive note than when it started, suggesting some weakening of demand. Sales for new vehicles began to decline near the end of the month, after rising throughout the month as supply continued to increase. That caused days of supply, which is based on active supply and the daily sales rate, to edge higher. Meantime, prices for new vehicles slipped, another indication of slightly weaker demand.”

Even with sales decreasing, new car sales are still 23% higher than this time last year, which is why the used car market feels so loose right now. 

Income Growth Beats Inflation to Help Vehicle Affordability 

The vehicle affordability index improved slightly going into June (lower is better, like golf), but only because income went up, not because prices improved. 

In fact, the average new auto loan rate  increased to nearly 9% and the average monthly used car payment continued to climb past $750 per month. 

Monthly New Car Payment Hits $768

The US median income increased by nearly half of a percent (.3%) and manufacturer incentive pricing on new cars continued to ease up. Both of those factors helped the vehicle affordability index in the face of increased interest rates and rising monthly payments. 

Cox Automotive Chief Economist Jonathan Smoke said we’re experiencing some ripples from Fed rate hikes. 

“The Fed pausing rate hikes after 15 months doesn’t undo the numerous increases that have limited new-vehicle retail sales growth over the past year. However, the good news for consumers is that the rates they see on auto loans likely peaked earlier this year and may not move up despite the threat of another rate increase in July.” 

While used car loan rates are much higher than for new cars, used car sales could benefit from falling interest rates as new car rates stay near all-time highs. 

It’s June 2023 and the average new car-payment is more than my first mortgage payment but that’s not slowing sales. 

And even with new car prices at an all-time high, used car sales are back on the downslope.

But, what we’re seeing is actually the market rightsizing after the pandemic caused a couple of wild years in the car market. 

So, as crazy as the market seems now, this is all ok. 

Plus, we’re finally seeing some manufacturer incentives on new cars to help combat the astronomical prices they’re charging. 

Before we go any further, here are the cars selling best and worst on the Carmigo Marketplace going into June:

Red Light x Green Light

• Green Light

• • • Camry
    • Tucson
    • RAV4
    • Soul
    • F150 (half tons)

• Red Light

• • Mini Cooper
  • Pathfinder
  • Luxury Sedans
  • Cherokee
  • Santa Fe Sport and “Sport” Trim SUVS

You can read more about each of these models and why we chose it for the list over at the Red Light x Green Light report.

Overall, Used Car Prices are Stagnant and Sales are Down, But that’s OK

The used car market looks to have continued its return to the mean, which paused briefly this spring. 

When we talk about free market capitalism and letting the markets decide, this is that. Markets don’t go up forever. Even Steph Curry misses shots sometimes. 

Used sales and prices have held pretty solid over the past few months, considering the volatility in the market since the beginning of the pandemic supply shortages.

Volatility in Used Car Prices

I’ve always lived near the gulf coast, home of oil companies and hurricanes. 

After a major hurricane disrupts gas supply, gas prices go up fast. But sooner or later, supply catches back up through a combination of repairing the storm damage and of folks using less gas due to prices. 

Going into the Pandemic, in 2020, the manheim index was around 150, steadily rising a couple points most year.

But when new cars stopped being made during the pandemic, used car prices skyrocketed, higher than they’ve ever been. Just like with gas, those numbers are going to end up going back down sooner or later.

And this is a fairly steady return to the mean, which is the best we can hope for.

While no one wants to sell as a market is on the way down, it’s not going back up anytime soon. So if you’ve got to sell a used car, now is as good a time as any.

Average Used Car Prices Higher Than Last Month, Lower Than Last Year

The average used vehicle listing price was $26,969 going into last month, the highest since the beginning of 2023, but that’s still down 4% from last year. 

This could be due partially to a preference for inexpensive used vehicles. With vehicle prices near all-time highs, people are reaching for the cheap stuff.

Days’ supply for under $10,000 vehicles was 31. Days’ supply for vehicles priced between $10,000 and $15,000 was 37, between $15,000 and $20,000 was 40 and $20,000 to $35,000 was 44. Vehicles priced above $35,000 had the highest days’ supply at 46.

New Car Sales Outperform Bold Predictions, Even in the Face of Rising Prices

Cox predicted May would see 20% increase in new vehicle sales, and their predictions were beaten. I totally didn’t expect to see new sales to continue going up because of prices and continually increased availability. 

But, I’m not the expert, Charlie Chesbrough is. He broke it down in a way I hadn’t considered last month:

“New-vehicle sales will show strong gains this month over last year’s levels, and on the surface, this is a bit surprising. Interest rates are substantially higher than a year ago, as are vehicle prices, and yet sales will increase year-over-year. The reason? Vehicle shoppers now have a much better chance of finding something that fits their needs. Pent-up demand, held back by limited product availability last year, is now being fulfilled as inventory levels improve around the country.”  

People couldn’t buy new inventory because it wasn’t available, and now that it is, people are buying the cars they saved up for, even if its way more expensive than it was a few years ago.

“New-vehicle inventory continues to improve, supporting a pick-up in the sales pace,” said Charlie Chesbrough, Cox Automotive senior economist. “Clearly, pent-up demand is being unleashed. How much pent-up demand exists is the question. We still expect sales to slow in the second half as economic headwinds, particularly rising interest rates, grow.”

New Car Prices Can’t Stay This High

I’m still skeptical about how sustainable this trend is because the affordability index is getting a little out of control.

The average list price for a new car is now above $47,000, which brings the average monthly payment on a new car loan to more than $700. 

We’re Finally Seeing Some New Car Price Incentives

New car prices may be at record highs, but at least manufacturers are beginning to issue discounts.

The average total incentive is higher than it’s been in the past year, coming in at $1,714 per vehicle.  

Used car sales volume jumped by nearly 300,000 used car sales in March over February, which is a good sign. 

Following the 2022 bubble used car prices had fallen to nearly pre-pandemic levels, and sales were down too. 

As the spring travel season continues, we should see steady used car sales and used car prices, thanks in large part to drops in used car supply and sustained high new car prices. 

“Prices have been falling, but the tight supply might be providing some price support,” said Cox Automotive Senior Economist Charlie Chesbrough. “Used prices may fall further, but it seems unlikely a massive decline will happen given the supply situation.”  

Best and Worst Cars to Sell

Green Light Cars

• Toyota Camry

• Chevy Silverado / Trucks

• Hyundai Santa Fe

• Jeep Wrangler | All Jeeps

• Hyundai Kona

Red Light Cars

• Maverick 
• Tiny Cars
• Minivans
• Ford Fusion
• Tesla

Used Car Sales Are Up

Used car sales volume spent five months below the 3 million sales mark, but so far, sales volume is continuing to climb in 2023. Volume is still under March 2022’s 3.4 million sales mark, but continued sales growth is a good sign for the spring. 

Some of this sales growth is seasonal, but some can be attributed to a very expensive new car market that has barely recovered from last year’s supply-chain issues.

Used Car Prices Hold, Sorta

The average used car listing price is up to $26,213, but that doesn’t mean people are actually getting more for their used cars right now. That average list price is down only 4% from last year when used car prices, and sales volumes were at record highs. 

Sellers are still asking more for their cars than buyers are willing to pay, but because demand is outpacing supply, there is some used car prices are holding fairly steady.  

Supply & Demand & Used Car Prices

These two balancing factors should keep used car prices stable this spring: 

1. As the average used car listing price goes down a little more, we should see increased buyer activity. 
2. And when those used cars are bought up, the number of available used cars should continue to drop. 

Here’s what Chesbrough has to say about it:

“The supply of used vehicles at dealerships is at its lowest point in our data, which goes back to 2019. Finding the right product at the right price is more challenging for buyers today.”

Segments

Pickup trucks, for a second consecutive month, were the only market segment/body type to gain price compared with mid-April 2022 — but that was only 0.1%.

The two segments with the largest drop in price since last year are luxury and minivans. For minivans, this is a first in a while since the family vehicles held strong through 2022. For luxury vehicles, this is an ongoing trend. 

New Car Sales