The used car market has enjoyed a meteoric rise over the past two years. This is thanks to what experts are calling a "perfect storm" of market conditions. A historic chip shortage crippled the new car market. Low-interest rates, pent-up demand, and consumers flush with tax refunds drove up asking prices. And to top it all off, the rental car market anxiously sought new vehicles while ceasing to pump used models into the market.   

Now, after a two-year high, used car inventories are low and consumer demand remains elevated. Yet, with the chip shortage continuing, and gas prices on the rise, it doesn’t look like the market is budging anytime soon. 

Used car prices rose 22.38% in the past year.¹ Analysts say they’ll gradually decrease over the end of 2022 into 2023. Still, they won’t be dropping to anywhere near pre-pandemic used car prices over the next couple of years.

While it is a seller's market right now, that doesn’t mean car dealers are on easy street. In such a competitive market, dealers need to be mindful of automotive inventory and pricing. It can be a challenge to meet car-buying customers' needs while turning a profit. 

This is where it helps to know how to buy a car at auction. Wholesale online dealer auctions can often be one of the best places for dealerships to find fairly-priced wholesale stock.

In our current market landscape, understanding trends is the key to stocking and maintaining competitive used car inventories. Let’s explore four used car trends that dealers should stay on top of to strategically source at wholesale vehicle auctions. 

Fuel-Efficient Vehicles Enjoy Popularity 

It’s no secret, gas prices are on the rise. According to AAA, the national average was $4.374 on May 10th, 2022.² This is up over a dollar from $3.28 at the beginning of the year.

Between high gas prices and continued sustainability efforts, consumers want fuel-efficient vehicles. Shopping consideration has risen 69% for electric vehicles and 32% for hybrids since the beginning of the year.³

While hydrogen fuel cell cars are still early on the adoption curve, high consumer demand for electric vehicles and hybrids has caused their price tag to skyrocket. As of February 2022, Hybrid prices are up 46.9% and electric vehicles are up 43% from last year.⁴

However, price increases and demand don’t just affect consumers. Since fuel-efficient vehicles are in high demand, they are harder for car dealers to find and stock at reasonable prices. 

As gas prices rise, any used fuel-efficient vehicles you can get your hands on will be a valuable addition to your inventory. 

Light Trucks Show Fast-Growing Demand 

The auto industry categorizes pickup trucks, SUVs, crossovers, and minivans as light trucks. Light trucks have outpaced smaller car types in sales in recent years. This is especially true as crossovers and SUVs have become more fuel-efficient.

Light trucks made up 79% of the new car market so far this year.⁵ Because of how small the price margin is between the new and used vehicle markets, this trend extends to used light trucks as well.

The tipping point was not so long ago. According to Tom Libby, automotive analyst at IHS Markit, SUVs outsold sedans for the first time in 2015, and the stronghold has been growing ever since.⁸ Why the shift? It comes down to generational drivers and practicality.

As Erich Merkle, Ford’s head of U.S. sales analysis explains, “Data shows boomers prefer smaller SUVs — they’re empty nesters that don’t need space but appreciate the ride height and easy ingress and egress. Millennials aged 35 to 44 probably haul children and maybe even their parents.”

To cash in on this growing trend and appeal to cross-generational buyers, dealers may want to prioritize stocking light trucks, SUVs, minivans, and crossovers. Really want to double down? Hunt for models that boast high safety ratings and fuel efficiency. 

Limited Used Car Inventories Erode Brand Loyalty

Between a disrupted supply chain and high consumer demand, used car inventories have fallen 2% since March.⁶ This makes the market even more competitive since consumers have fewer options. 

Because of how difficult the market is for buyers right now, some consumers are hanging onto their old cars longer. As of March, 47% of consumers planned to hold off buying new cars.⁷ This means fewer trade-ins, severely limiting one of the ways car dealers acquire used vehicles. This is the time to get into dealer auctions to help you find great inventory. 

Because of the limited used car inventory and slowed vehicle production, dealers would be wise to market their new and used vehicles simultaneously. Consumers are less set on whether they are buying a used or new vehicle instead of making the decision based on available stock and prices. 

A survey conducted by Auto List revealed that when asked what shoppers would change about their journey, “31% of people said they were switching to a different brand — rather than looking for a larger or smaller vehicle, something in a different body style, or giving up on certain non-safety-related amenities.”⁹ When it comes to securing a car, “available now” is becoming an ever more powerful motivator. 

Appreciating Value Provides Unique Opportunities 

It’s a historic time in the used automotive industry. Used vehicles are appreciating value faster than the stock market or cryptocurrencies. The average value of a used car has gone up 22.07% from May 2021.¹ Even older models that used to sell under the 15K mark are skyrocketing in value. 

Stocking older models may work in your favor, as many consumers are being priced out of the market by higher-priced new models. However, if you have many reliable options under 15K, you’re likely to attract attention. Start with the wholesale value of a car, and price it accordingly for your customers. 

The best approach is to know your target customers and the amount they tend to be willing to spend on a car. Understanding the market segment you’re serving will help you better stock and price appreciating used cars to sell.

Stay Competitive in a Seller’s Market 

Used vehicle prices are still trending high and consumer demand is there. So, how can dealerships stay competitive and capitalize on used car market trends?

Keep your used car inventory diverse, prioritize fuel-efficient vehicles, stock cars with good resale value and market your comprehensive inventory rather than car prices themselves. 

To start finding diverse, in-demand inventory today, register below. We look forward to working with you at ACV Auctions! 

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