Auto Industry Looks to Spur Demand After Used Car Sales Fall in May

June 7, 2023

As consumers and dealers grappled with economic headwinds in May, used car prices and retail sales declined.

The price of used cars dropped 2.7% month-over-month and 7.6% year-over-year to reach their lowest level in 2023. Compared to April, retail sales declined 11% from May 2022. Days’ supply of preowned vehicles remained unchanged from April, resting at 45 days. It was 49 in 2022. New light-vehicle and fleet sales, on the other hand, increased 22.9% and 45% from the previous year.

Cox Automotive's Chris Frey, senior manager of economic and industry insights, admitted that used car prices could fall even further in the coming months, but warned that they would slow down "once we reach the lower prices we saw during last year's auction season." However, he cautions that “Two consecutive reads in either measure do not a trend make,” explaining that cheaper vehicles could also drive demand and keep values steady.

Although Cox Automotive acknowledges that lower used car prices benefit consumers rather than dealers, it also predicts the auto industry's ongoing supply struggles will offset any shift toward affordability. Other factors, including interest rates and inflation, have further leveled the playing field. However, storeowners probably expect better business in the coming months despite the stagnating market.

The retail market appears to be stable, but many expect exorbitant new car prices to eventually drive buyers back to the used car market, possibly driving used car prices up. It remains to be seen whether affordability will drive short-term demand in the preowned market or simply force manufacturers to offer more discounts.