Skip to content

Struggling Amidst Tightened Used Car Market: Dealers Manage Difficulties

Used vehicle wholesale values, as indicated by the Manheim Index, reached 207.4 in July, with an average value of approximately $19,000. The market is currently experiencing a tightening of supply, particularly among late-model off-lease vehicles. This situation forces dealers into a...

Market Dealers Grapple with Tightened Used Car Supply
Market Dealers Grapple with Tightened Used Car Supply

Struggling Amidst Tightened Used Car Market: Dealers Manage Difficulties

In the automotive market, the supply of used vehicles, particularly nearly new ones, is in short supply, with a days' supply of 48 days for Lithia and 37 days for Asbury overall. This shortage is due in part to the current demand for used cars, which has risen as a result of tariff concerns.

Recent tariffs, such as a 25% levy on non-USMCA compliant imports and tariffs on Chinese and other foreign autos, have caused manufacturers and dealerships to pass much of these costs to consumers, adding roughly $1,760 or more per vehicle on average. This increase in new car prices has led consumers to seek out used cars as a relatively cheaper alternative, boosting demand significantly in the used-car market.

This demand surge often comes amid already limited used inventory, partly due to previous manufacturing slowdowns, such as during the COVID-19 pandemic. As a result, wholesale prices for used cars have climbed accordingly. Reports from sources like the Manheim Used Vehicle Value Index signal used car prices likely increasing in the weeks following tariff implementations.

The Manheim Index, a measure designed to track used-vehicle wholesale price changes, weighted for a changing mix of product segments and mileage, currently stands at 207.4 for July 2025, a 2.9% increase from July 2024. This corresponds to an average used-vehicle value of $18,968 at auction.

While Asbury Automotive Group's used-vehicle retail unit volume decreased by 4% in the second quarter compared to the same period last year, the company's used-vehicle retail gross profit increased by 11%. Lithia Motors, on the other hand, saw a 4% increase in used-vehicle unit sales in the same period.

Both companies, however, have different strategies for used car sales. Lithia Motors emphasizes pursuing volume and market share, while Asbury Automotive Group intends to prioritize profit per vehicle over volume. Despite the differences in approach, both companies acknowledge the impact of the constrained supply environment on used-vehicle profitability, as stated by Asbury's President and CEO, David Hult.

In summary, tariff concerns create a ripple effect: tariffs raise new car prices, boosting demand for used cars, which tightens supply and drives wholesale used-car prices up. This dynamic reflects both direct price effects and broader supply-demand adjustments in the auto marketplace.

Meanwhile, the growth of electric vehicles may find a key in used electric vehicles, rather than tax credits. As the demand for electric vehicles continues to grow, the availability of used electric vehicles could play a significant role in their widespread adoption.

[1] Tariffs on Cars and Parts: What You Need to Know [2] Tariffs on Auto Parts Could Raise Repair Costs for Used Cars [3] How Tariffs Could Impact the Used Car Market [4] Manheim Used Vehicle Value Index [5] Tariffs and the Auto Industry: What You Need to Know

  1. The surge in demand for used cars, driven by tariffs on new cars, could potentially lead to an increase in the popularity of sports, such as cycling or running, as some consumers might opt for cost-effective athletic pursuits instead of expensive new cars.
  2. Concurrently, the escalating prices of used cars due to tariffs may affect sports teams that rely on sponsorships from car manufacturers, threatening their budgets and potentially impacting the weather conditions of sporting events, as lesser funding may be allocated for necessary infrastructure maintenance.

Read also:

    Latest