The used-vehicle market seems poised to strengthen considerably via the second half of 2023, based on Cox Automotive Chief Economist Jonathan Smoke.

It has been a troublesome 12 months for the used-vehicle enterprise: The brand new-vehicle market is more and more targeted on dearer fashions and luxurious share, which has trickled all the way down to impression used-vehicle pricing, Smoke mentioned. Rate of interest hikes and uncertainty a couple of U.S. debt default additionally disrupted gross sales exercise and the used-vehicle market has bled some consumers who cannot discover sure automobile fashions or trims they need, he added.

Now the market appears to be on the cusp of bettering, although client affordability points and rebounding new-vehicle competitors have noticeably sapped it of the energy it exhibited simply two years in the past, Smoke informed Automotive Information.

“I do assume the worst of the used-vehicle market is upon us,” Smoke mentioned on Monday. “I’m optimistic that each month later this 12 months will really create energy within the used-vehicle market.”

With used-vehicle costs again in depreciation territory, Could and June may go down within the books because the “worst Could and June in historical past” for used autos dropping worth, Smoke mentioned.

Nevertheless, these autos dropping worth is “a very good factor for the individuals who’ve been sitting on the sidelines not capable of finding a automobile on the value level they need,” Smoke mentioned.

Ground below costs

There’s a shortage of used autos lower than 4 years previous due to a COVID-19 pandemic-induced lack of new-vehicle manufacturing in 2020 and 2021. Smoke mentioned that downturn spelled bother for the used-vehicle provide as a result of gross sales into stock channels that “feed” the market — leasing volumes and rental and fleet gross sales — fell dramatically.

These volumes are starting to make a considerable restoration, however that extended downturn has manifested into a decent used-vehicle provide, Smoke mentioned.

“It means there’s an absolute flooring of the place used automobile costs can go,” Smoke mentioned.

12 months-end outlook

Modest value decreases are prone to proceed within the second half of 2023, based on an up to date year-end Cox Automotive estimate.

Cox Automotive additionally estimates 35.7 million used autos can be bought within the U.S. in 2023, marking a really slight improve from its earlier forecast of 35.6 million. Cox additionally estimates 18.9 million used autos can be bought at retail in 2023, a determine unchanged from its earlier forecast. In its mid-year overview, Cox boosted its estimate for licensed pre-owned automobile gross sales to 2.6 million, up from 2.2 million beforehand.

These numbers illustrate a market that has drastically developed since 2021, when sturdy demand and favorable financial situations boosted used-vehicle gross sales to a report 40.6 million in complete and 21.2 million at retail.