Used vehicles: A newly appeciating asset

The situation means dealers are paying what were previously unthinkable prices for badly needed used-vehicle inventory.

On a Friday this month, Jason Pettigrew, used-vehicle manager at Cain Toyota in North Canton, Ohio, bought 16 vehicles at auction. For the cars 2 years old or younger, Pettigrew paid their full original sticker price.

Cain Toyota typically has 190 to 220 new vehicles to sell.

“We have 47 on our lot right now,” Pettigrew said. “The buyers are still coming in, but we don’t have the inventory for it. So the only thing we can do is sell cars that are going to be built, or are on their way in, or we flip them to a used car.”

Ken Ganley, president of Ganley Auto Group in Ohio, said his managers used to get nervous when a used car would hit 50 days on the lot. But days-to-turn is meaningless as of late.

“I’m amazed every day at a car that my management team and I would all agree is a $10,000 car, and then we could quickly sell it for [$13,500] or [$14,000] on a wholesale basis,” Ganley said. “You say, ‘Geez, what’s going on here?’ ”

Smoke said last week to expect six to eight more weeks of rising prices. Beyond that, higher prices and lower inventory are the new normal for the wholesale market for the foreseeable future.

“I don’t think we’re going to see the wholesale market resemble anything like 2018 or 2019 likely until we’re in the year 2025 or later,” Smoke said.

That’s because of a smaller vehicle park.

“And that car park is not going to kind of magically grow in the next two years,” Smoke said, “because no one is expecting new-vehicle production to be above the level that would produce sales.”

J.D. Power’s Paris also expects prices to remain elevated for the long term — probably the next year or two.

“All of this used supply that’s going to be coming back to the market — everything’s kind of banked at this point,” Paris said.

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