Hot wholesale used-car prices could slide as demand cools

Wholesale used-vehicle prices, on fire for several weeks after initially plummeting in the spring, could finally be cooling off even as retail used-vehicle prices steadily climb.

For the week ended Aug. 23, wholesale auction prices dipped by an average of 0.7 percent, according to J.D. Power. That marked the first material decline since the week ended April 23 and the second consecutive week that wholesale prices were flat or down, the company said.

"Used prices have been just insanely strong, white hot, since May, after bottoming out in the middle part of April," said Larry Dixon, J.D. Power's senior director of valuation services. "They rose week in, week out, really until just two weeks ago."

J.D. Power is forecasting wholesale prices will continue to move lower into September as pent-up demand cools and headwinds related to the coronavirus pandemic grow. The company expects prices at year-end to be slightly higher than pre-virus levels.

That outlook could change given uncertainty around new virus outbreaks, more federal stimulus, employment conditions and the potential hit from Hurricane Laura to already-low inventory levels. The extent of damage to dealerships in Louisiana and Texas from last week's storm was not known at press time.

Cox Automotive Chief Economist Jonathan Smoke said last week that used-vehicle supplies, after rapid declines this spring and summer, have "settled into a consistent level of supply over the last few weeks."

Retail supply was at 38 days as of Tuesday, Aug. 25, below the 44-day norm, Smoke said. Wholesale supply was "normal" at 24 days.