Used- and new-car patterns likely getting back to ‘normal’ in 2024
“Normal” hasn’t often been a word to describe the auto industry in the last four years, but 2024 could be the return of stability and typical market patterns.
That includes a “normal seasonal trend” when it comes to depreciation in the wholesale vehicle market, along with “modest growth trajectory” in the new-car segment, Black Book said in a report Monday.
“The data suggests a promising bounce back for the automotive market in 2024,” Black Book chief data officer Alex Yurchenko said in a news release accompanying the report. “The industry will undergo a gentle yet positive trajectory in both the new and used segments.”
Within the wholesale segment of used, the 2024 depreciation rate is expected to land at roughly 18% for the year, according to the report. That’s down from 20% last year and up from the pre-pandemic average, which was 15%.
This indicates “signs of reversion to pre-pandemic patterns,” the company said.
Early February will likely kick off normal seasonal patterns of depreciation in wholesale values that are expected to run through the spring market, Black Book said, followed by steeper deprecation in the back half of 2024.
The company is forecasting that its Seasonally Adjusted Retention Index will fall a “modest” 5% this year but will still beat pre-pandemic readings by at least 25%.
On the retail side of the used market, Black Book anticipates that continued demand slowdown will drive prices down in an attempt to turn inventory more quickly.
“This will likely be worsened by reduced pricing pressure from the new vehicle sector due to their higher incentives and improved inventory availability,” Black Book said.
“Furthermore, the composition of available inventory in the used vehicle market is forecasted to shift.”
The company anticipates that while off-rental supply will increase, it will remain below where it was before COVID. Repo volumes are likely to continue rising steadily, while off-lease volumes are likely to show a “noticeable drop” by the end of the year.
This is likely to change the age distribution of used-car supply.
On the new-car side, Black Book is anticipating roughly 15.8 million sales this year, which would be about a 4% year-over-year gain. The company attributes these gains to an expected 6.6% increase in OEM incentives this year.
Dealers’ new-car inventory is expected to perhaps climb past 3 million units, which is softer than the 3.5 million-unit levels before COVID. However, this would be a major gain from the post-COVID trough of fall 2021, when new-car inventory was at 800,000 units, Black Book said.