In a conference call Thursday, Cox Chief Economist Jonathan Smoke said average wholesale prices have increased for eight straight weeks through last week. And they do not appear to be at a peak for 2021.
"Basically, the odds favor more increases between now and spring because we're still in a very supply-constrained market in total, in both the wholesale market and the new-vehicle market," Smoke said, adding that relatively high sales conversion rates continue to suggest aggressive buying by dealers.
The sales conversion rate at Manheim was 65 percent last month. It was at 52 percent in September 2019.
Used retail days' supply was estimated at 37 days in September 2021. Normal days' supply, which Cox estimates using data from its vAuto inventory-tracking software, is 44 days. Wholesale supply ended September at 18 days. A normal wholesale supply is 23 days.
Used-vehicle inventory levels have been faring far better than new and in fact have been inching toward normal levels as of late, Smoke said. "New inventory as of mid-September was down 75 percent compared to 2019, with days' supply down a little less as the declining sales pace has kept days' supply at its bottom for the last several months," he said.
Auto retailers are clearly looking to stock up inventory on their lots amid limited new-vehicle supply, and they could already be anticipating the spring selling season, Smoke said.
But when asked about the high wholesale prices hitting dealer margins, Smoke noted that auctions only represent the most expensive method for dealers to get used cars and trucks. A typical franchised dealer sources only about a quarter of their used inventory from auctions, he said.
"So don't worry about their margins," Smoke said. "While they are being compressed a bit from the most recent trends, their margins are still substantially higher than what they were pre-pandemic."