Wholesale vehicle market takes a mysterious turn

Hey, everyone — Here’s a new one for you: Robot dogs are now building BMWs. That’s right.

BMW's Hams Hall engine plant in the UK has some high-tech helpers called "SpOTTOs." These robot dogs, named after a BMW co-founder, patrol the factory floor using cameras, heat sensors, and microphones to sniff out overheating machines and air leaks.

What wild times we live in.

—CDG

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Every time I post about the wholesale car market, my DMs and comments blow up with dealers sharing their hot takes and on-the-ground POVs.

And it's no wonder – auction prices affect everything from trade-ins and retail prices to book values and more.

I recently had a chat with one of the top wholesalers in the world, Bob Hollenshead, to get the scoop on what's really happening in the wholesale market.

Here’s what I found out...

Wholesale vehicle prices have been on the rise for a few weeks.

For the full month of July, wholesale used vehicle prices increased month-over-month from June by 2.8% when adjusted for seasonality. according to Cox Auto’s Manheim Index. 

Reminder: These are just national averages, and prices can vary a lot depending on your brand and region. A buy-here-pay-here dealer in the city will see something totally different from a new Ford dealer out in the country at the wholesale level.

Flashback: From January 2020 through the crazy peak at the end of 2021, average auction prices spiked by 66%, or over $9,000. 

Why? OEM production delays and plant closures severely diminished new car supply, shooting prices up for new and used cars. 

But while new car inventory bounced back, the used market didn't. Millions of vehicles that would have ended up in the used market never made it, so supply is still struggling. Average used vehicle inventory was 9.8% lower in June against 2023, while new car supply is up 24.4% year-over-year. 

Still, wholesale prices declined year-over-year in 2023 and continued to drop early in 2024. Good news for consumers as new and used car prices have been dropping but the declines started to slow down quickly once summer arrived. 

But now that wholesale prices are increasing, retail prices could follow suit in around 4 to 6 weeks. And with unemployment rising, car buyers can’t absorb any more price increases. 

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So, why are prices increasing?

One theory is that wholesale car buyers at dealerships who sat on the sidelines during the CDK Global outages are rushing back to the wholesale market to restock their inventories. This increased competition is driving prices up.

But it goes a level deeper than that. There's a ton of psychology at play in wholesale vehicle buying. Dealers keep a close watch on their rivals, and the peer pressure often sparks a "follow-the-leader" mentality, where they mimic each other's moves.

This “co-validation” creates a feedback loop where dealers subconsciously rely on each other's actions to determine a car's value. This can lead to irrational bidding behavior, pushing prices higher than their true market value. 

What’s more: “The quality of ‘in-play’ units are generally more condition-challenged than I remember in my 50-year experience,” Bob told me. 

The reasons?

1. Basically – some consumers are in a weaker financial position and are driving their cars until the wheels fall off. The average age of cars and light trucks in the U.S. reached a new record of 12.6 years in 2024. 

2. And a lack of 1-to-3-year-old cars means older vehicles at auction with more wear and tear than in years past.

Case in point: The “leasing cliff” which I’ve talked about many times. 

3. All dealers need affordable, quality used cars. But it’s never been tougher to source them and that’s why many dealers are keeping less-than-perfect trade-ins and not sending them to auction.

4. Consumers now have many options for selling their cars online through platforms like third-party marketplaces. And by using real-time marketplace data, wholesale buyers can better assess vehicle values and take fewer risks when bidding.

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What does that mean for dealerships?

Lower used vehicle quality = more reconditioning = lower profits. 

Today's turn time averages 50.2 days, a 23% jump from 2023. Holding costs for used cars are now $85 a day. Multiply that by dozens or hundreds of vehicles, and floorplan costs really start to bite into profits. To move inventory faster, dealers will likely have to price vehicles more competitively.

Bottom line: The wholesale market is always up and down—that's nothing new. But wholesale prices right now feel…off. And something tells me these aren’t the last increases we’ll see this year. What do you think? Are these price hikes just a temporary thing, or is there a bigger shift coming in the market?

The iconic dealer: The legend Fred Beans on wealth, succession, future of America
65 years in the car business. 27 dealerships. 20 brands. Fred Beans, the founder and CEO of the Fred Beans Automotive Group, is an iconic Northeast dealer who’s seen it all. In this episode, I talk with Fred about his journey from farmhand to dealership mogul, wealth-building tips from Warren Buffet, his succession plan, and much more. Listen here.

A.I. expert: Rise of the A.I. employee in car dealerships
Always on time, never takes a day off, and doesn’t complain…AI could be your new favorite coworker. In this edition of the CDG Podcast, I got to chat with Eric Rea, co-founder and CEO of Podium about machine learning and how dealers are using “A.I. employees,” aka chatbots, to drive everything from sales to service appointments. Stream it now.

Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Uber for Business, Podium, and OPENLANE for making these episodes possible.

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move.

• Braman Miami is seeking an experienced auto technician to work on Hyundai models.

• Ron Marhofer Auto Family is looking for a General Sales Manager to join its team in Ohio.

• Toyota is seeking a vehicle parts/labor claims customer advocate near Plano, TX.

Looking to hire? Add your roles today—it’s 100% free.

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• U.S. auto regulators open probe into more than 77,000 Nissan SUVs.

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Thanks for reading. See you on the next edition…

—Car Dealership Guy

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