The U.S. used vehicle market showed signs of strain in September, as consistent issues with affordability contributed to a slowdown in retail sales. According to vAuto Live Market View data from Cox Automotive, retail used-vehicle sales fell 5.2 percent in September compared to August. This dip reflects the challenges currently facing consumers in a high-interest-rate environment, even as the market itself has still seen significant growth compared to the previous year.
A total of 1.42 million used vehicles were sold at retail by both franchised and independent dealers in September, a 6.6 percent increase year over year. However, the short-term pullback suggests that the cumulative effect of high prices and expensive financing is beginning to temper consumer activity.
High Loan Rates Squeeze Buyers
A primary factor driving the September sales decline is the persistent issue of affordability.
“Used-vehicle retail sales fell more sharply than new-vehicle sales in September,” said Scott Vanner, manager of Economic and Industry Insights at Cox Automotive. “Seasonal patterns and affordability pressures were likely the main drivers of this pullback. The recent reduction in the Federal Reserve’s rate has not yet resulted in lower used auto loan rates. Rather, a modest rise in subprime rates and an increased proportion of subprime loans have elevated average used auto loan rates to over 14 percent.”
This environment makes it increasingly difficult for many potential buyers to secure financing that fits their budget. As borrowing costs remain elevated, some consumers are delaying purchases or are priced out of the market entirely. This dynamic is reflected in inventory levels, as the days’ supply of used vehicles at the end of September stood at 48 days. This is an increase of four days from the beginning of the month and one day higher than the same time last year, suggesting that vehicles are sitting on lots a bit longer as sales cool.
CPO Market Sees Sharp Decline
The certified pre-owned (CPO) segment, often a popular choice for buyers seeking a balance of value and reliability, experienced an even more significant drop in September. CPO sales are estimated to have decreased by a sharp 19.4 percent compared to August, with a total of 194,020 units sold.
While this represents a significant monthly downturn, the CPO market is still performing better than it did a year ago. September’s CPO sales were up 6.7 percent year over year, and year-to-date sales are 2.7 percent higher than in the same period last year. This suggests that while the CPO market is not immune to the broader affordability challenges in the short term, it continues to hold appeal for many consumers. The sharp monthly drop, however, indicates that even this value-oriented segment is feeling the pinch from higher borrowing costs.
As the industry heads into the final quarter of the year, the used vehicle market will certainly continue to fluctuate. The year-over-year growth demonstrates a level of resilience, but the monthly decline and rising inventory levels signal that the path forward will be heavily influenced by interest rates and consumer financial health. Navigating this environment will require a keen focus on inventory management and finding ways to address the affordability hurdles where they hitting customers the hardest.
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