Younger used vehicles are becoming harder to find

It looks like an expected drop in late-model-year used vehicle availability might be upon us as we saw used inventory levels decline again in July by 3.6% month-over-month (MoM), which now has inventory levels down 2.8% year-over-year (YoY). Used inventory levels peaked in late May and have been on a decline since then, with the majority of the declines coming from franchise dealers, particularly 2020-2021 model year vehicles, which accounted for over 69% of the total decline. The shortage of younger used vehicles will likely continue to be an issue for years to come due to depressed new sales during the pandemic-induced chip shortage and particularly the decline in leasing in recent years. One outcome of this shortage is that it could help to stabilize used vehicle prices by keeping late-model vehicle prices higher, which should keep older vehicle prices from declining sharply.

New & used retail sales rebounded in July from June disturbances

After sales volumes were impacted by CDK disruptions in June and the early part of July, those delayed sales were consummated the week of July 8th, which has helped to push retail demand levels to artificial highs this month. New sales were particularly impacted, which is why CarGurus Vehicle Demand Index readings are up 20.7% MoM and 10.7% YoY; used sales were slightly less impacted in June, which led to increases of 10% MoM and 9.2% YoY. It’s difficult to pull out what the natural rate of sales demand would normally be; however, it’s important to note that days to turn is elevated YoY for both new and used, highlighting that not all vehicles are moving quickly.

EV prices look to have stabilized

The volatility in electric vehicle prices has been one of the most notable trends over the past year; however, it looks like average prices for new and used EVs might finally have found some stability. The year-over-year price decline for new EVs is down 2.3% YoY in July, while ICE vehicles are down 4.7% and hybrids are down 9.2%. On the used front, EV prices are still down significantly YoY, but MoM readings have increased for four consecutive months. The pricing volatility has been off-putting for consumers looking to purchase and a challenge for finance companies looking to lease. Stabilizing used EV prices could create a bedrock for the next cycle of EV growth.

Other key trends:

• The average mileage of used EVs is on the rise, however it remains 45% below that of hybrids and 56% below ICE vehicles in July. When viewed at a model year level this disparity increases as vehicles age.
• EV and hybrid listings as a percentage of total are growing, however ICE powered vehicles continue to remain the dominant option for consumers
• New vehicle Market Days Supply is elevated for a number of OEMs as they struggle to balance supply with demand.