Used vehicle values rise in January, bucking expectations

Written by:
Joey Pizzolato
Auto Finance News
February 7, 2023

Used-vehicle values increased sequentially in January on both a seasonally and non-seasonally adjusted basis as used retail sales gained momentum and dealers padded their inventory.  

The Manheim Used Vehicle Value Index rose 2.5% month over month but decreased 11% year over year, bringing the index to 224.8. Prices jumped 1.5% MoM on a non-seasonally adjusted basis, atypical for this time of year, Cox Automotive Senior Manager of Economic and Industry Insights Chris Frey told Auto Finance News.  

Preliminary data from Cox Automotive suggests that higher volume at auction — when compared with the last few years — is driving up prices, Frey said. “That’s likely helping prop up those prices as well, especially when you look at that non-seasonally adjusted number that’s clearly moved by auction activity.”

Six of the eight major segments logged MoM price increases ranging from 0.8% to 3.6%, with pickups posting the highest price increase, according to Manheim. Still, all eight segments posted YoY declines.  

Dealers are likely padding their inventory after selling off older vehicles at the end of 2022, Erin Kerrigan, founder and managing director of Kerrigan Advisors, told AFN.

“I think what you’re seeing is a little bit of a reaction to the end of last year, where dealers were writing down their inventory and getting rid of their used inventory because the news was negative on used-car prices,” Kerrigan said.

“My gut tells me there’s now a correction not dissimilar than what you often see in the stock market —  December is down and January is up,” she said. “So, [dealers] took their expected losses to offset their gains of 2022 and now they’re back in the market buying up cars because they need inventory, and the auto retail market is proving out to be stronger than many expected in 2023.”  

In fact, inventory levels were down YoY and MoM in January, coming in at 44 days’ supply. That figure is down from 56 days at the end of December and 50 days at the end of January 2021, according to vAuto data. Wholesale supply also dropped six days from December and five days from January to 26 days.  

Used retail sales remained strong in January, rising 16% from December and 5% when compared with the same reporting period last year, according to Dealertrack data.  

Meanwhile, consumer confidence declined 1.7% in January, according to the Conference Board, a non-partisan think tank. Views of the present situation improved, but future expectations fell by 6.7%. Consumer plans to purchase a vehicle in the next six months were unchanged from December.  

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.

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