The problem is that there are not many new or used low-mileage vehicles left.īy the end of 2022, Black Book expects prices to decline but not return to pre-COVID levels. In the last month or so, rental companies are returning to the U.S. In Q1, rental companies nearly stopped buying rental-type units with the hope that new inventory was coming. Yet EVs values are projected to drop as well in three or four years. However, EV values surged as they did as the other segments, dominated mostly by Tesla. “EVs are still a relatively small segment,” Yurchenko said. There’s also an increase in used EVs coming back to the market. More EVs entered the market last year, and there’s higher lease penetration for them. The EV FactorĮlectric vehicle (EV) sales are projected to gradually increase, making up about 20% of new sales by the end of this decade however, there’s much to accomplish for mass adoption, including charging infrastructure, building a used market, and creating a market for the second life of the battery. While residuals will decline, they will still be much higher compared to that pre-pandemic figure. “With production levels returning to normal next year, depreciation will get to a normal seasonal level.Īccording to Yurchenko’s data, a three-year-old vehicle pre-pandemic retained about 50% of its value. Now, to get to the same price point, you need to look at vehicles that are 10-plus years old.” High Wholesale and Retail PricesĮven with projected price declines over the next two or three years, wholesale prices are still going to be 30% to 40% above where we were pre-COVID, according to Yurchenko. Three years ago, that meant you were buying a 2–8-year-old vehicle. In a typical spring market, consumers are looking for vehicles at around $10,000. There are three different classes of vehicles by their age group, and the trends for the most part are similar. “Now is a nice time to sell them, but not many people have them to sell,” Yurchenko said, adding that week-over-week price changes are close to 1%. Not many of them are being produced, and there’s a high demand for them, so prices keep going up. Full-size vans have appreciated for nearly two years. Demand was great, but supply was limited, which caused prices to increase. Last year, every single segment appreciated, some close to 50%, Yurchenko reported. This year, depreciation is projected to return to normal levels. Overall, vehicles have appreciated by nearly 30%. When the pandemic hit, there was a drop in volume for the first part of the year, and then it began to increase. Pre-pandemic, average annual depreciation was somewhere in the teens, according to Yurchenko. Lease sales were projected to be down about 15% in 20, contributing to lower used supply three years out. Rental sales were down about 50% in 2020 to 2022 hence, the supply of newer used vehicles will be limited in the next several years. In the longer term, leases that were not sold this year are not going to come back for the next three years.” Rental units are not returning to the market. “We’re going to be in this limited used-vehicle inventory environment for a while.
“With all of the issues we’re having with new production, used returns are going to drop in the next several years, and that’s going to keep used prices high,” Yurchenko said. Pre-pandemic, there were more than 3 million vehicles on dealer lots, according to Yurchenko. As a result, rental fleet sales will be at historically low levels for the third consecutive year. The big question is whether manufacturers can produce enough vehicles to satisfy the dealers and rental companies. He added that dealers are fighting to be first in line to get inventory. “The majority of consumers are paying above sticker price, which was unheard of a few years ago,” Yurchenko said. The average incentive in March 2022 was close to 3.5%.īlack Book expects month-over-month growth in new vehicle sales for the fourth quarter of 2022, yet total light-vehicle sales are only expected to reach 15 million this year. Pre-pandemic, the average incentive was about 11% of MSRP, according to Yurchenko. Inventory limitations and new sales incentives keep hitting record low levels every month. Yurchenko believes the most optimistic forecast is that the industry will reach some sort of normalcy in terms of production levels by 2023, but dealer lots are not going to return to normal levels anytime soon. Supply-chain issues - including the ongoing chip shortage - are still the biggest factor right now driving this whole scenario.
Numbers are still low, but the volume of repossessions is increasing.” “Recent trends point to an increase in repossession volume. “We’re talking about 1 million vehicles per year,” Yurchenko said.
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