Entering the final month of the third quarter, prices in the wholesale used market are starting to surpass typical seasonal depreciation, while conversion rates in the auction lane remain around 60%.
Driving the news: Black Book’s August Market Insights show the wholesale market depreciated around 0.5% per week throughout the month.
The nine car segments followed by Black Book saw prices drop by 0.46% in the middle of the month before easing off, with prices falling by 0.35% at the end of August.
For the 13 truck and SUV categories, depreciation picked up more speed, staying between 0.53% and 0.61% in August.
Zooming in: Black Book VP of Data and Analytics Laura Wehunt explained the market is finding a new balance after the spring acceleration of prices started earlier, and ending the first quarter 2% up. Prices were down one-half of a percent at the end of Q2.
“We have been starting to see increasing [depreciation] since we closed out the second quarter, moving into the third quarter. This is not any red flag to me because of how strong the first and second quarter were,” Wehunt said. “What we’re projecting is around 12% annual depreciation for the year of 2026, so very normal depreciation on an annual basis. But to have that normal depreciation on an annual basis, we are going to see a little higher depreciation in the third and fourth quarters.”
Difference in models and age: 8-to-16-year-old vehicles are holding their values higher than models in the 0-2 and 2-8 categories.
Cars are also holding onto their values a little more than trucks, with 0- to-2-year-old compact cars seeing prices appreciate at the end of August.
“Compact cars had a really strong first half of the year, up 4% in the first quarter and up 1.27% in the second quarter,” Wehunt said. “This is fueling that affordability piece. If you’re struggling with a vehicle, you need a reliable mode of transportation, you’re looking at that cheaper vehicle, and historically those compact cars have been it.”
Conversion remains high: Lower prices have not been a result of slow activity in the auction lanes. Conversion rates at the end of the month neared 60%.
“This is not normal for us to see this type of depreciation and have conversion rates be this strong,” Wehunt explained. “We’ve got a nice flow of vehicles moving through the market right, but [sellers] are just willing to let them go at a lower price.”
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Impact coming to retail: Black Book noted the days to turn vehicles ended the month at 34 days, with retail prices and listings remaining well above the start of the year.
Wehunt expects prices on the retail market to slowly come down, following the depreciation of the wholesale market.
“When we start to see the market turn down on the wholesale side, there is usually a lag before we actually see the prices come down in the retail market,” Wehunt said. “It's about six to eight weeks after the market is coming down for us to see that reflected in the retail market from when that decline started on the wholesale side.”
Takeaway for dealers: The wholesale market remains very fluid, nearing the last quarter of the year. Wehunt urges dealers to monitor the market.
“We’re going to see larger depreciation in this fourth quarter. We’ll see increasing new car incentives, which always puts pressure on the used market,” Wehunt said. “I would encourage dealers to be selective and know what does well in their area….I would be very cautious with your acquisitions but don’t stop buying. There’s still demand there, especially on that lower end of the market.”
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