Used car sales jump in May, inventory dips

Used car inventory at the beginning of June declined month-over-month following strong used vehicle retail sales in May.

By the numbers: After a mild tax refund season, sales of used vehicles increased 15.9% from April. This dropped the average supply from 48 to 45 days, which is 8% lower than last year. 

• A total of 1.62 million used cars were sold by both franchised and independent dealers, up 15.8% year-over-year. 

• The total supply of used vehicles on dealer lots (franchised and independent) began June at 2.26 million units. This is 3% higher than a year ago but lower than the 2.27 million units at the start of May.

• The average used-vehicle listing price was $25,670, $136 higher than May, but a decline of 6% from a year ago. 

Key quote: “Following a less-than-spectacular spring selling season, May used vehicle retail sales rebounded to the highest level so far this year,” said Scott Vanner, senior analyst of Economic and Industry Insights at Cox Automotive. “In fact, used retail sales volume is higher than any month since March 2022, when tax refunds were juicing the market.”

Between the lines: While used car prices are falling year-over-year, affordability remains and challenge for many consumers. Used vehicles priced under $15,000 had the most constricted inventory with only 34 days’ supply. The average price of the 5 top-selling used cars came to $23,999. But used auto loan rates (11.5%) continue to keep buyers on the sidelines, especially those with lower FICO scores. 

Looking ahead: Dealer inventory dipped after May's sales surge. But, rising new car production will likely keep pushing used car prices down. This is good news for budget-driven car buyers. Yet, high used auto loan rates remain a significant barrier to entry. Can falling prices outweigh the challenges of financing? Time will tell.

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