Individuals purchased fewer used vehicles in Could than they did one 12 months earlier than. However the variety of licensed pre-owned (CPO) automotive gross sales rose.

Total used automotive gross sales fell 3.4% in comparison with final Could. However CPO gross sales rose 5.6%.

The rise comes regardless of a sluggish 12 months for CPO gross sales.

“CPO gross sales often expertise a big surge from January to Could, with a pointy improve in gross sales through the spring promoting season,” stated Chris Frey, senior supervisor of Financial and Trade Insights at Cox Automotive. “Nevertheless, this 12 months’s improve has been much less dramatic than we often see.”

Cox Automotive is the guardian firm of Kelley Blue Ebook.

About Licensed Pre-Owned Vehicles

Most automotive gross sales are used automotive gross sales. Most years, Individuals purchase greater than twice as many vehicles used as new. Shopping for used permits you to pay much less and keep away from a lot of the depreciation penalty that robs a brand new automobile of serious worth early in its life.

Associated: Shopping for a Licensed Pre-Owned Automobile – What You Ought to Know

However a used automotive can break down and value important cash to restore. A brand new automotive comes with a guaranty to assist forestall that.

CPO vehicles are the Goldilocks possibility between new and used. CPO vehicles are often two to 6 years previous, totally inspected by the dealership that sells them, and have a guaranty overlaying repairs if one thing goes incorrect early within the automotive’s life.

Almost all producers provide a certification program backed by the manufacturing facility that builds their vehicles.

A Robust Used Automobile Market

Guarantee or not, the used automotive market is difficult in 2023. Total used automotive gross sales are down, and costs are up – the typical purchaser paid greater than $27,000 final month.

Our analysts say a short-term drop in used automotive costs could also be coming quickly – sellers have been paying much less for used vehicles at public sale for a number of months. A lower in wholesale costs often means a drop in retail costs about six to eight weeks later.

However the underlying situations of the used automotive market are dangerous for consumers and more likely to stay that method for a number of years. Pandemic-related manufacturing slowdowns imply producers constructed 8.1 million fewer vehicles during the last two years than anticipated. These vehicles won’t ever attain the used automotive market, preserving costs excessive.

Excessive Curiosity Charges, Tight Credit score Requirements

“Whereas CPO outperformed complete and retail used-vehicle gross sales in Could, CPO gross sales are most definitely muted resulting from continued excessive costs, declining credit score availability, and excessive rates of interest,” Frey famous. “The truth is, CPO loans noticed probably the most tightening in Could each month over month and 12 months over 12 months.”

Debtors with distressed credit score more and more have nowhere to go — Subprime and deep subprime loans have been almost 1 / 4 of the market as just lately as 2018 however are barely 8% right this moment.