The declines indicate a market environment that has significantly changed since 2021, when robust demand and favorable economic conditions propelled used-vehicle sales to a record 40.6 million in total and 21.2 million at retail.
Total used-vehicle sales could drop to 35.6 million and retail used-vehicle sales to 18.9 million in 2023, according to a forecast published last week by Cox.
“Total used transactions and retail sales will likely be down another 1 percent, which is far better than 2022’s 10 percent decline, but still another leg down,” Cox Automotive Chief Economist Jonathan Smoke said Thursday.
Early indications show used-vehicle sales could be “muted” between January and the spring, according to Chris Frey, senior manager of economic and industry insights at Cox Automotive. He said it is uncertain for now whether sales for that time frame will follow historical trends. In years past, retail used-vehicle sales have typically been bolstered by tax return season, when consumers have more cash on hand to spend on vehicles.
Frey said he is keeping his sales expectations in check for several reasons: Used-car prices are still inflated, interest rates are higher, fears of a recession abound, and consumers are no longer receiving stimulus checks like they were in 2021. Higher prices and lending costs are clearly taking a bite out of the shifting market, Frey said. Affordability, in particular, will “remain a challenge,” especially for subprime and lower-income buyers, he said.
Though Cox Automotive has reduced its used forecasts for 2023, it is not expecting the bottom to drop out of the used market, Frey said. However, according to Smoke, a weaker supply of nearly new vehicles will affect the market.