By Jonathan Smoke, Chief Economist, Cox Automotive
June 12, 2023
Jonathan Smoke
Used-vehicle sales volumes were stable in May relative to April, but they were off from the normal seasonal pattern, which is to see growth. Volumes were down 11% year-to-year, the worst performance so far this year. Wholesale used vehicle values fell again in May, and the price declines accelerated as the month progressed.
Consumers continue to tap credit, but credit card usage declined in April. Auto credit access fell again in May across most auto sales channels and across most lender types.
Used-Vehicle Sales Volumes Held Steady in May but Off the Normal Growth Pattern
Used retail sales estimates based on vAuto data indicate that sales volumes were flat in May compared to April, whereas normally, they would have grown. Volumes were down 11% from a year ago, which was a deterioration from April and the worst year-to-year performance so far this year. CPO sales again outperformed and were up 2% from April and up 5% from May a year ago.
As the retail market has slowed this spring, wholesale vehicle value trends turned down, according to the Manheim Used Vehicle Value Index. The Index declined 2.7% in May on a seasonally adjusted basis after falling 3.0% in April. The decline in May pushed the Index back down to 224.5, down 7.6% from a year ago. The unadjusted price change in May was a decline of 1.7%, leaving the unadjusted average price down 8.2% from a year ago.
Looking at price trends by week, price declines accelerated as the month progressed. Over the last four weeks, the Three-Year-Old Manheim Market Report (MMR) Index declined an aggregate of 2.6%.
Consumers Keep Spending with Credit, but Credit Card Usage Declined in April
The Federal Reserve reported that Consumer Credit, excluding housing-related debt, saw growth accelerate modestly to $23.01 billion in April from a downwardly revised $22.84 billion in March, driven by growth in non-revolving debt, which includes auto and student loans. Credit card debt grew by $13.5 billion, a decline from March. Non-revolving debt growth accelerated to 9.5 billion, the highest growth rate since January.
Credit Availability Drops to Two-Year Low in May
Auto credit access tightened in May across most loan channels and lender types, according to the Dealertrack Credit Availability Index. The Auto Credit Total Loan Index measured that auto credit tightened by 0.4% to the lowest level of credit availability since February 2021. Movement in credit availability factors was mixed in May. Yield spreads narrowed, average terms were lengthened, and down payments declined, and those moves improved credit access for consumers.
However, the subprime share declined, and the negative equity share declined, and those moves hurt credit access for consumers. Most channels saw declining credit availability in May. Independent used loans saw the only expansion in credit access during the month, while certified pre-owned (CPO) loans saw the most tightening. On a year-over-year basis, all channels were tighter, with CPO loans having seen the most tightening.
