The used-car market in the second quarter appeared to have been stronger for dealers than it was in the first quarter, according to data released Monday by Cox Automotive, but used supply is looking a bit trickier for both independent and franchised dealerships.
And that may raise a question as to how long the used-car sales momentum may last, the company said in analysis around the Q2 2019 Cox Automotive Dealer Sentiment Index.
Plus, additional analyses from the company show used-car sales declining in May.
“It is encouraging to see that dealers remain optimistic,” Cox Automotive chief economist Jonathan Smoke said in a news release, referring to dealers’ overall outlook. “But their outlook has moderated substantially from the peak in optimism we saw last year as numerous negative factors continue to dampen future expectations.
“If market strength is being driven by used vehicles, can used-vehicle sales remain strong considering declining inventory?” Smoke said.“That’s a concern to watch in the coming months.”
As it stands, when asked how they would describe the current used-vehicle sales environment, the overall index was 56 (out of 100) in the second quarter, compared to 53 in the first quarter and 55 a year ago.
Franchised dealers were much more positive (72) on the used-car sales environment than were independents (51). Still, both were up from Q1. Franchised dealers were steady with year-ago numbers and independents climbed slightly (from 50).
However, when dealers were asked about current used-vehicle inventory levels, the indices dropped significantly.
Overall, it fell from 54 in Q1 to 46 in Q2. A year ago, the overall level was 49.
For franchised dealers, their index on used inventory fell from 62 in Q1 to 53 in Q2. A year ago, it was at 58.
For independents, it dropped to 44 in Q1, after reaching 52 in Q1. A year ago, the used inventory index for independents was at 45.
In a question that was new to the study this go-round, dealers were asked to describe the used-vehicle inventory mix.
Overall, it was at 63. Franchised dealers had an index of 66, with independents at 62.
Cox Automotive said in a separate analysis released Monday that May’s seasonally adjusted annualized rate for used-car sales was an estimated 39.2 million.
A year ago, it was 39.7 million and in April, it was 39.3 million.
Cox added that certified pre-owned sales climbed month-over-month but fell 3% year-over-year in May.
In its latest Manheim Used Vehicle Value Index report released Friday, Cox Automotive said there was an estimated 4% year-over-year decrease in used-vehicle sales for May.
Going back to the data on dealer sentiment, the overall Cox Automotive Dealer Sentiment Index score was 49 in Q2. That is up from 48 in Q1 and down from 51 in Q2 2018, neither of which “statistically significant,” change, the company said.
“Again this quarter, the index shows that slightly more dealers feel the current market is weak compared to those who feel the current market is strong,” it said.
However, Smoke did note that, “The overall view of the market is remarkably stable this spring relative to the beginning of the year.”