Market Update for July 2024: Short Day Supply for Used Vehicles

Jamie Longwell has nearly 30 years experience in the automotive industry, including F&I, Inventory Management, and Partnerships. He has spent the last decade as a Performance Manager, formerly with vAuto and now with VINCUE.

There has been a 50% drop in Market Day Supply for Used Vehicles since December 2024, resulting in higher used car prices despite stubbornly high interest rates. This is good news for sales but presents challenges for sourcing. Here’s how to maximize the value of the inventory you have and source new inventory at the right price from the right channel.

Manheim just released their monthly used-vehicle value index for the first half of July, showing continued increases in used car values. Overall, the industry ended 2023 with a 49 day supply of vehicles , but by April 2024 had dropped to a 34 day supply. Midway through July we are now sitting at a 26 day supply. What are some factors causing this?

• No off-lease units available. Leasing was scarce through the covid years and it has been cheaper for a customer to buy out their lease vs buying a new car or even another preowned unit.
• Dealers are keeping more inventory. Whenever used inventory is in short supply, dealerships keep more of the inventory they would typically wholesale to maintain inventory levels and take advantage of higher demand.
• More customers are selling private party. Consumers continue to struggle with negative equity after the used car boom in 2021 and 2022. They believe if they sell private-party they can sell higher and close the equity gap.
• Customers are increasingly selling to national stores who are offering more money. National stores have national supply chains, meaning they can easily and quickly move inventory wherever it will sell best. This also means they’re willing to pay more if they know they can transport a vehicle to another market and sell higher.

Low supply and high demand are always a recipe for high prices. What dealers need to do now, especially with interest rates still high and consumers buying more new than used, is to focus on maximizing the value of the inventory they have. If your bestsellers are in short supply, focus your attention and advertising budget on those that are available.

Now is also a good time to be the best at merchandising. Understand what works for each 3rd party site you’re spending your advertising dollars on and make sure you’re playing to those strengths. When was the last time you sat down with your Cargurus, Autotrader, Cars.com rep and asked them to explain how you can get more attention on their site? It is not always price that drives the placement or IMV (Instant Market Values).

And, always important, be vigilant in your pricing strategy on vehicles that are at the higher price point that move slower.

Take control of your inventory sourcing by building, developing, and trusting a buying plan that makes sense for what you truly need. When you have a clear picture of what you need and what you know will sell, then you can start thinking outside the box for going to get that inventory.

With VINCUE, you have an omni-channel sourcing solution to compete for vehicles that are in the market ready to be targeted – private party listings, auctions, and direct dealer wholesale. You can run specific campaigns for lease buy backs and target previous customers that may be a few years into their current loan. The Service Drive is also a primed source for trades and street purchases when you target high-cost service order customers, giving customers a way out of the bill.

Develop a Dealer Network for Wholesale Trades

Lastly, create a dealer network that you can trade cars with. I know this sounds pretty standing, but we do this with new cars every day so why not used inventory too?

Pros:

• No auction fees
• No transportation fees
• No hidden issues
• Not buying someone else’s problem
• You get to test drive and inspect before you buy

Most importantly, you’re not paying retail premiums at the auction for high dollar, high market day supply units that move slow already.

In today’s market it can seem scary and in most cases, this will eventually work itself out. Now more than ever it takes understanding your market and also understanding the tools you have available to help you understand the data that will drive better decisions. Make sure to reach out to your Performance Manager so they can help you not only understand how to find and understand the data but also share best practices that others are using to win in today’s market conditions.