The tale of 2023 in terms of used car values could revolve on the word “correction.” That has undoubtedly been the case for the most of 2022, as evidenced by comments made by Tom Kontos, chief economist of ADESA, which were sent through email to Auto Remarketing.
The difference between the average auction prices in 2022 and those in 2019 has narrowed during the course of the year.
According to Kontos’ statistics, average auction prices in February were 50.7% more than in 2019. That difference had decreased to 30.5% by November.
The statistics show that this occurred in the midst of a May to November depreciation (18.1%) that was nearly three times as sharp (6.4%) as the spring price increase (7.2% between February and May), which was lower than that of 2019 (8.3%).
According to Kontos, used car prices still have space to “adjust” to more typical levels of depreciation and compared to new car pricing.
According to him, “I anticipate average prices to decline even further in December and January (1-3% each month) and to climb only mildly in the spring (less than 5% from February to May), leaving them down substantially on an annual basis.” With greater than usual seasonal falls from May through December, the correction will last the remainder of the year.
Alex Yurchenko, senior vice president and chief data science officer at Black Book, forecasts an 18% depreciation rate for automobiles that are two to six years old, after a 22.5% depreciation rate in 2022.
After a 2.0% loss in 2020, these automobiles actually saw a 28.7% gain in 2021. According to Black Book, depreciation was 16.8% in the pre-COVID year of 2019.
In contrast to the pre-COVID normal annual pace, “our current expectation is for wholesale prices to continue the drop through 2023 at the increased annual rate,” Yurchenko added.
While generally the second half of the year experiences the majority of the downturn, he predicts that each half of 2023 will exhibit comparable depreciation rates.
To read our blog on “KP introduces a slew of new digital skills and economic initiatives,” click here
