The Used Car Marketplace in January presented a landscape of mixed signals, reflecting both resilience and emerging pressures. While retail used-vehicle sales demonstrated robust growth, various market indicators suggest a nuanced environment for buyers and sellers alike. This analysis delves into the key trends shaping the used car marketplace, providing insights into pricing, sales conversion rates, vehicle segment performance, and consumer sentiment.
One crucial metric, the daily MMR Retention, which tracks the alignment of market prices with current MMR (Manheim Market Report) values, averaged 98.8% in January. This figure indicates that market prices slightly diverged from MMR values, dipping below December levels. Year-over-year, valuation models for MMR retention were marginally lower by 0.5 percentage points and trailed 2019 levels by eight-tenths of a point for the same period. Conversely, the average daily sales conversion rate experienced a positive surge, climbing to 58.8%. This represents a significant 5.7 percentage point increase compared to the previous month and slightly surpasses typical rates for this time of year. To provide context, the average daily sales conversion rate in January over the preceding three years stood at 54.4%.
Examining major market segments reveals a diverse performance landscape in seasonally adjusted prices year-over-year in January. The luxury segment emerged as the frontrunner, experiencing the most substantial growth at 2.0% compared to January 2023. SUVs also demonstrated positive momentum, increasing by 1.2%. However, certain segments underperformed relative to the broader industry. Mid-size sedans experienced a decline of 1.6%, trucks fell by 2.1%, and compact cars registered the most significant decrease, dropping by 3.4% compared to the previous year. Month-over-month trends mirrored this segment variation. The luxury segment again led the upward trajectory, rising by 2.7%, while SUVs increased by 1.2%. In contrast, mid-size sedans declined by 0.9%, trucks decreased by 1.8%, and compact cars exhibited the largest contraction, falling by 2.1% over the last month.
Analyzing the market through the lens of powertrain reveals interesting dynamics. Electric vehicles (EVs) demonstrated a stronger performance compared to December, marking their third consecutive month-over-month increase. This growth also outpaced the industry average overall. Specifically, EV values climbed by 2.1%, while non-EV values rose by a more modest 0.4% during the same period. Despite this positive monthly momentum, seasonally adjusted EV values in January continued to show year-over-year declines, albeit at a reduced rate compared to preceding months. Looking ahead to January 2025, EV values are down 5.1% compared to January 2024, whereas non-EVs experienced a slight year-over-year increase of 0.3%, marginally below the overall industry average.
Retail activity in the used car marketplace showed encouraging signs in January. Based on vAuto data, initial estimates indicate a robust 6.2% increase in retail used-vehicle sales compared to December, with a substantial 15% rise year-over-year. However, the average retail listing price for a used vehicle experienced a slight downward adjustment, decreasing by 1.3% over the preceding four weeks.
Inventory levels in the used car marketplace, measured by retail used days’ supply, showed a tightening trend. Initial assessments using vAuto data suggest that January concluded with a 47 days’ supply, down from 50 days at the end of December and significantly lower than the 56 days recorded in January 2024.
In the new vehicle market, sales in January increased by 3.8% compared to the previous year. However, volume decreased by 25.7% from a strong December performance. The January sales pace, or seasonally adjusted annual rate (SAAR), reached 15.6 million, up from last year’s 15.0 million pace but lower than December’s robust 16.9 million level.
Combined sales into large rental, commercial, and government fleets experienced a slight decrease of 0.9% year-over-year in January. After accounting for estimated fleet deliveries into dealer and manufacturer channels, remaining new retail sales are estimated to have increased by 6.6% from the prior year. This resulted in an estimated retail SAAR of 12.5 million, up 2.1% from last year’s pace but down from December’s estimated 14.0 million level. Fleet share constituted an estimated 16.4% of the market, down from 18.7% in the same period last year.
The rental risk market presented a mixed picture in January. The average price for rental risk units sold at auction decreased by 0.4% year-over-year. However, rental risk prices did increase by 0.8% compared to December. Average mileage for rental risk units sold in January reached 55,800 miles, a significant 23.6% increase compared to last year’s level, marking the highest mileage observed since July 2023. For the month of January, rental unit average mileage was also 7.9% higher than in December 2024.
Consumer confidence metrics revealed a downward trend in January. The Conference Board Consumer Confidence Index® experienced a 4.9% decline in January, exceeding anticipated decreases, although December’s index was revised upwards significantly. Consumer sentiment regarding both present conditions and future expectations weakened, with the assessment of the present showing a greater decline. Consumer confidence was down 6.1% year-over-year, representing the first annual decline since September. Intentions to purchase a vehicle within the next six months dropped to the lowest point since August, although purchase plans remained higher compared to the previous year. The sentiment index from the University of Michigan also declined, falling by 3.9% in January to 71.1, falling short of expectations as it further declined from the initial reading earlier in the month. This final monthly decrease resulted in a 10% year-over-year decline in the index. Underlying views of current conditions and future expectations both weakened, with future expectations exhibiting a more pronounced decrease. One-year inflation expectations rose to 3.3% from 2.8%, and five-year inflation expectations increased to 3.2% from 3.0%. Consumer views on vehicle buying conditions modestly deteriorated, primarily driven by concerns regarding interest rates, while price perceptions were less negative. The daily index of consumer sentiment from Morning Consult registered a marginal 0.1% decline in January, ending a six-month streak of increases. This slight decrease effectively reversed the 0.1% increase observed in December, returning sentiment to the levels recorded at the end of November. The daily index reached its peak in mid-January, achieving its highest level since March 2020. Despite the January decline, the index remained up 11.0% year-over-year. According to AAA, the national average price for a gallon of unleaded gasoline increased to $3.10 in January, a 1.3% rise from the end of December but still 2% lower than the previous year.
In conclusion, the used car marketplace in January demonstrated a complex interplay of positive and negative indicators. While retail sales showed strength and sales conversion rates improved, pricing pressures in certain segments, rising rental risk mileage, and declining consumer confidence warrant close attention. These factors collectively shape the dynamics of the used car marketplace, influencing both short-term trends and longer-term outlooks for the industry.
