Insider Used Car Market Data

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Manheim Auto Auctions is one of the country’s largest sources of used vehicle transactions. This week, the CEO held a conference call to discuss the automobile market, trends, and what’s happening with automotive businesses nationwide. Interesting data presented in the call can help car buyers and ensure that consumers and even dealerships understand the current state of the market and what to expect in the future. Let’s look at some of the slides from the presentation to see what they mean and what they might indicate for future automotive business trends.

The first topic discussed during the used vehicle conference call was consumer sentiment. Despite high-interest rates and inflationary pressures, people are still spending money, as evidenced by strong spending in various industries, such as apparel and travel. In fact, consumer sentiment is even improving, which is surprising given the current economic climate. It’s on an upward trend, despite people’s complaints about inflation.

So, how does this affect the vehicle industry? Well, the basic overview is that the retail supply of both new and used cars is improving. Although it’s easy to improve the supply of new cars, the inventory of used cars is about the same. Now, let’s dive into the details. Wholesale vehicle value has seen the largest annual decrease in history, but it’s important to consider where it’s coming from. Looking back to 1997 and 2003, the trend line has remained unchanged for almost 30 years. However, in 2019, there was a sudden spike followed by a crash, but it’s still way above the trend line even after the crash. The next slide explains that the crash is just giving back large gains. So, although there has been a crash, it’s coming from a higher level and is not going below the average. Additionally, the depreciation is the same across all ages of vehicles, whether they are one year old, five years old, or ten years old. The lines for depreciation are almost parallel, regardless of the year of the vehicle.

Here’s an interesting trend regarding vehicle mileage, specifically rental cars. When companies like Enterprise, Hertz, and Avis sell cars at auctions, many of these cars come from fleet turn-ins or rental car companies. Going back to 2003, the mileage on these cars was always around 30,000 miles. However, in 2009, the mileage increased to about 40,000 miles. Rental car companies like to keep their cars within the warranty period, which is why they previously kept them at around 30,000 miles, but improved warranties allowed them to keep the cars up to 40,000 or 50,000 miles. The mileage range remained in this range for many years, but in 2021, rental car companies kept cars for 60,000, 70,000, or even 80,000 miles because they couldn’t get new cars from the factories. This caused a rise in used car inventory with higher mileage, which was especially noticeable in dealer lots. However, in 2019, rental car companies started to dump inventory as they didn’t need as many rental cars. Then, they realized they needed more cars and started keeping them longer and longer, resulting in a surge of 80,000-mile cars going through auctions. The trend is returning to an average of 55,000 miles on rental cars. This explains why the mileage on used cars has increased, as rental car companies kept cars with warranties up to 40,000 miles but then extended the mileage to 70,000 or 80,000 miles. If you pick up any rental car, whether a minivan or sedan and check the mileage, you’ll see that it’s typically in the range of 65,000 to 69,000 miles across dealerships.

You might be wondering how all these cars end up with the same mileage, and it’s because rental car companies were selling them. Here’s a list of the top volume vehicles sold by rental car companies: 2020 Toyota Corolla, 2021 Toyota Corolla, 2020 Nissan Altima, and Ford Explorer (an SUV). The transaction prices for these cars were mostly in the teens, with the only exception being the Ford Explorer at almost $30,000. One Volvo was sold in the smaller volume for about $34,000, but everything else was in the teens price-wise. The outlook for the used car market is that there may be another down year, possibly around 4% down. This is a good overview of what’s happening with the used car market and where values might go, from the perspective of a company that has the most insight into the used car market. They transact more used cars than anyone else and see the trends of who’s buying, who’s selling, and which models are in higher demand, as they come from the dealer, consumer, and fleet sides.

Have questions about the used car market? Schedule a consultation with a vehicle title expert!