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Tuesday, 02 June 2020 17:17

Analysis: FL, TX, MN Cities Show Biggest Drop in Used Car Prices

Written by Lattice Publishing, The Center Square
Analysis: FL, TX, MN Cities Show Biggest Drop in Used Car Prices Shutterstock

Index

The uncertainty precipitated by COVID-19 has affected every sector of the economy, including the automotive industry.

Car dealerships are experiencing sharp declines in used car sales, as much of the country still remains under restrictions.

 

While used car sales have always been prone to fluctuations, data from the U.S. Census Bureau found retail used car sales plummeted more than 20% year-over-year in March, even before the full effects of stay-at-home orders were realized. The last time used car sales fell so precipitously was at the onset of the Great Recession in 2008.

 

Research from automotive research firm Manheim shows in response to reduced demand, wholesale prices---what dealers pay to buy the used cars they sell---experienced a more than 11% drop in April.

 

However, the drop in wholesale used car prices has not fully hit the retail market---at least not yet. According to analysis from CoPilot, which aggregates car listings data in real time across 46,000 U.S. dealers, retail prices for pre-owned vehicles only fell 3.6% nationwide between January and May 2020.

 

Experts from Kelley Blue Book suggest because car dealers have largely avoided purchasing new inventory in recent weeks, they aren’t in a rush to cut prices as a way to move their existing inventory.

 

However, an analysis from MAX Digital predicts that a combination of record supply, damaged consumer confidence and new car incentives will ultimately create a perfect storm, causing retail prices to drop sharply in the coming weeks.

 

Despite only a slight drop in retail prices at the national level, some parts of the country are already experiencing steeper declines than others. Between January and May, individual U.S. states experienced price drops ranging from 1% to 5%.

 

The states with the biggest drops include Utah, Delaware and Florida, which all experienced decreases greater than 4.5%.

 

By contrast, the states with the lowest drops include Hawaii, Wyoming and Mississippi.

 

At a more granular level, certain metropolitan areas have also experienced faster declines in used car prices, representing good opportunities for buyers.

 

To identify these locations, researchers from CoPilot, a car shopping app that helps guide users through the buying process, analyzed its proprietary dataset of more than 6 million used car listings in the U.S. and created a ranking based on each location’s change in average listing price between January and May 2020. To improve relevance, only metros with at least 1 million residents were included in the analysis.


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