J.D. Power and LMC Automotive predict that U.S. auto sales will drop 2.1% in May year-over-year. But it also mentioned that the sale of used vehicles "remains strong."
If new car sales are due for a slump, we'll see that in results from the world's major manufacturers in coming quarters. But when it comes to used cars, data culled from CarMax ($KMX) for hundreds of thousands of vehicles shows that pre-owned prices are entering a season of record highs.
On May 25th, CarMax had 51,612 cars listed with an average price of $21,686.04. That is the highest average for used car prices since at least 2016.
As we've written before, May is a popular month for buying a used car, but this year appears to be outpacing historicals, even when factoring inflation. Since we started tracking this data in May 2016 up until today, the cumulative rate of inflation is 6.5%, while the price of the average used car increased by 7.78% at its peak this past week, and 7.39% as of May 27th.
On May 25th, CarMax had 51,612 cars listed with an average price of $21,686.04. That is the highest average for used car prices since at least 2016.
Inflation is also a bit tricky to pin on a used car lot; there is plenty of volatility given that the same used cars won't be on the lot three years from now, especially at a dealership such as CarMax.
Pre-owned SUVs appear to be driving the trend
... but the road to understanding what type of vehicles are becoming more expensive isn't that straight and narrow.
Take Honda ($HMC), which has near-notorious reliability across a wide range of vehicles.
What vehicles are causing this increase in average price? It is mostly Honda's SUV (Pilot), Minivan (the Odyssey) and compact SUV (CR-V), as well as its four-door sedans (Accord and Civic)
While one may think Honda is powering this increase in used car prices alone, there seems to be a trend among makes and models that are bulkier cars and, by design, family vehicles. Take GMC from General Motors ($GM) and its Yukon SUV, as well as its Sierra 1500 truck:
Then again, there is Dodge ($FCAU), which has its Charger brand of sports cars selling for more and more each year.
So what is the takeaway here? On a case by case basis, it's tough to say whether bulky family cars or sports cars or any vehicle type are causing the price of used cars to move past the rate of inflation. As we wait to see the actual rise or fall in auto sales, both in used or new, we'll continue to analyze average price trends to see any correlation to what consumers are buying (or not).
