People purchased fewer used automobiles in Could than they did one yr earlier than. However the variety of licensed pre-owned (CPO) automobile gross sales rose.

General used automobile gross sales fell 3.4% in comparison with final Could. However CPO gross sales rose 5.6%.

The rise comes regardless of a gradual yr for CPO gross sales.

“CPO gross sales normally expertise a big surge from January to Could, with a pointy improve in gross sales throughout the spring promoting season,” stated Chris Frey, senior supervisor of Financial and Business Insights at Cox Automotive. “Nonetheless, this yr’s improve has been much less dramatic than we normally see.”

Cox Automotive is the father or mother firm of Kelley Blue E-book.

About Licensed Pre-Owned Vehicles

Most automobile gross sales are used automobile gross sales. Most years, People purchase greater than twice as many automobiles used as new. Shopping for used allows you to pay much less and keep away from a lot of the depreciation penalty that robs a brand new automobile of great worth early in its life.

Associated: Shopping for a Licensed Pre-Owned Automobile – What You Ought to Know

However a used automobile can break down and value vital cash to restore. A brand new automobile comes with a guaranty to assist forestall that.

CPO automobiles are the Goldilocks choice between new and used. CPO automobiles are normally two to 6 years outdated, totally inspected by the dealership that sells them, and have a guaranty masking repairs if one thing goes fallacious early within the automobile’s life.

Almost all producers supply a certification program backed by the manufacturing unit that builds their automobiles.

A Powerful Used Automobile Market

Guarantee or not, the used automobile market is difficult in 2023. General used automobile gross sales are down, and costs are up – the typical purchaser paid greater than $27,000 final month.

Our analysts say a short-term drop in used automobile costs could also be coming quickly – sellers have been paying much less for used automobiles at public sale for a number of months. A lower in wholesale costs normally means a drop in retail costs about six to eight weeks later.

However the underlying circumstances of the used automobile market are dangerous for customers and prone to stay that method for a number of years. Pandemic-related manufacturing slowdowns imply producers constructed 8.1 million fewer automobiles over the past two years than anticipated. These automobiles won’t ever attain the used automobile market, retaining costs excessive.

Excessive Curiosity Charges, Tight Credit score Requirements

“Whereas CPO outperformed complete and retail used-vehicle gross sales in Could, CPO gross sales are more than likely muted attributable to continued excessive costs, declining credit score availability, and excessive rates of interest,” Frey famous. “In truth, CPO loans noticed essentially the most tightening in Could each month over month and yr over yr.”

Debtors with distressed credit score more and more have nowhere to go — Subprime and deep subprime loans had been almost 1 / 4 of the market as not too long ago as 2018 however are barely 8% right now.