Used-car prices eased by a record amount for the month of June. That has shares of used-car dealers moving higher.
The Manheim Used Vehicle Value Index, a closely watched indicator of car prices, fell 10.3% in June from the prior year. It’s the tenth consecutive month of annual declines. June’s decrease was a record for the month, according to Cox Automotive, the entity that owns Manheim.
The used-car pricing index is now off about 17% from peak levels, reached in January 2022. It is still almost 40% higher than prepandemic levels.
Lower prices can be a mixed bag for the auto sector. Falling prices for used cars can result in lower prices for new cars, which can reduce profit at
Ford Motor
(ticker: F) and
General Motors
(GM). Falling prices can also reduce selling spreads for dealers. A car purchased by a dealer two months ago that is still on the lot might be worth less today.
But lower prices also mean less pressure on consumers and more car sales.
Pressure on the consumer has been significant. The percentage of new car buyers paying more than $1,000 a month for their vehicle exceeded 17% in the second quarter, a record. That’s a lot of money and one reason new car sales remain roughly 10% below prepandemic levels.
At this point, investors don’t seem to mind lower prices for dealers. They are happier with less consumer stress and higher potential sales volumes.
Carvana
(CVNA) stock finished up 16% Monday, while the
S&P 500
advanced 0.2% and the
Nasdaq Composite
rose 0.2%.
Shares of other dealers are up, too.
CarMax
(KMX) shares were up 1.6% and
Lithia Motors
(LAD) shares were up 0.7%.
Carvana stock might be doing better than those because it’s been hit harder than most dealer stocks, down more than 90% from peak levels reached in 2021. The company also announced Monday that its total EV unit sales have increased by 786% over the past five years.
That means if Carvana was selling 100 EVs a month five years ago, it is selling roughly 828 EVs a month today. That’s only an example. Carvana didn’t disclose the number of EVs sold. It did say in the release the company sold its first
Tesla
(TSLA) in 2014.
The news isn’t as bullish for auto makers. Ford and GM shares were up 0.6% and 0.1%, respectively. Investors appear to be balancing more volume arising from lower prices with the prospect of lower profit per car sold.
Write to Al Root at [email protected]
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