What to Know About Falling Used Car Prices

Greetings.

For better or worse, retail and wholesale used vehicle prices have aligned in the same direction. That’s downward, in case you’ve been hiding under a rock over the past few weeks. Other numbers also show that new cars are getting more expensive for the average consumer. It results from higher lending costs and less-generous automakers, things that won’t change soon.

Read on for an example of a dealer misbehaving and how some OEMs react to the Inflation Reduction Act.

Cheers!

Market At A Glance

As of this writing, the CarGurus Index stands at $29,968, the first time it’s been below $30,000 since December. This number summarizes the average used car retail transaction amount, and it’s been in steady decline for weeks (dropping $201 in the past seven days). It adds up to a 2.16% decline over the past month.

Wholesale Used Car Prices Fall

Well, there’s something to be said for consistency. The Manheim Used Vehicle Index (which reflects wholesale transactions) shows a 2.0% drop from September through October 15. That’s a 10.3% decrease from last year. Only weeks ago, retail and wholesale used car pricing were headed in different directions, but both figures are now on the same path.

Breaking Headlines

• Auto dealers see improvement in inventories - TheFreePress

• Wall Street eyes auto industry earnings for signs of ‘demand destruction’ - CNBC

• Baxter Auto sells 4 Stellantis dealerships in unique deal - Autonews

• Passport Automotive settles FTC suit over illegal fees, discrimination for $3.38 million - Autonews

• Jeff Landry hits back at Elon Musk's Tesla in Louisiana lawsuit over car dealer rules - Nola

• Carvana's Michigan license remains suspended after court ruling - Autonews

• Dealer M&A roundup: Another 9 stores change hands - Auto Remarketing

Dealer Essentials

• Why car dealers must have a consistent service menu process - CBT News

• EVs spell opportunity for service departments - Autonews

• What will EVs, over-the-air fixes mean for dealership service departments? - Autonews

• How to measure the value your service advisors bring to the dealership - CBT News

• How Car Dealers Can Keep, Win Back Service Customers - Wards Auto

New Cars Get Less Affordable in September

Turning to the other side of vehicle sales, Cox Automotive reports purchasing a new car was more expensive last month. A typical buyer in September needed 42.2 weeks of income to pay for the average new vehicle, up somewhat from 42.1 weeks in August. In practical terms, the average monthly car payment rose to $738, a 0.7% increase and a record high.

The increase comes despite a 0.3% decline in the average transaction price for a new vehicle (at $48,094). Consumers can thank rising interest rates (at a 15-year high for auto loans) and decreasing manufacturer incentives for the jump.

Maryland Dealer Settles with FTC for $3.3 Million

Passport Automotive Group agreed to settle with the Federal Trade Commission over alleged deceptive and discriminatory practices. The Maryland-based dealer group will pay more than $3.3 million for adding illegal fees to its car prices and subjecting Black and Latino customers to higher financing costs.

“The Commission is continuing its crackdown on junk fees and discriminatory practices that harm Black and Latino consumers,” remarked Samuel Levine, director of the agency’s Bureau of Consumer Protection. He warned, “As families struggle with rising prices, companies that think they can hit consumers with hidden fees should think again.”

The FTC cited one specific instance of the dealer advertising a vehicle for $24,050 but selling it for $26,440 due to “illegal add-on fees.” The extra charges came from reconditioning or certification fees that were tacked on in breach of OEM standards for certified vehicles.

Left-Out Automakers Responding To New EV Build Requirements

The passing of the Inflation Reduction Act, with its new domestic assembly requirements and restructured EV credits, caused many automaker CFOs to lose sleep. Companies that once calculated available tax credits into their projections woke up to a new world.

Now that the dust has begun to settle on the substantial change to EV assembly and sales in the U.S., some automakers are responding. And they’re not all taking an “if you can’t beat them, join them” method.

Hyundai Motor Company head Jose Munoz told CNBC that the new legislation deals an astronomical blow to the company’s bottom line. “The impact is huge,” he adds, as all Hyundai and Kia EVs are built outside North America. Yet rather than announce a shift in assembly plants, Hyundai will seek change through the lobbying of officials.

But EV upstart Fisker Inc. is exploring a polar-opposite approach and embracing evolution. As reported in Automotive News, CEO Henrik Fisher announced the company is quickly looking for an American assembly site for its Ocean SUV. Production is already set to begin next month in Austria, but Fisker hopes to start U.S. vehicle output as early as 2024.

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