Used Vehicle Sales Continued to Decline in June: What Stocks are Affected?

Used Vehicle Sales Continued to Decline in Junes

Used Vehicle Sales

The mid-month report from the Manheim Used Vehicle Index reveals a 0.3% seasonally adjusted decline in wholesale used vehicle prices in the first half of June compared to May. The Index now stands at 196.8, reflecting a sustained downward trend in vehicle pricing. Notably, this figure marks an 8.5% decrease from June 2023, highlighting significant year-over-year price drops in the used vehicle market.

Key Highlights

  • Mid-June Index Value: 196.8 (seasonally adjusted)
  • Monthly Decline: 0.3% from May
  • Year-over-Year Decline: 8.5% from June 2023

Market Trends and Influences

Cox Automotive, the parent company of Manheim, observed that the early weeks of June experienced larger-than-normal price drops, continuing a pattern that began in the final few weeks of May. This trend suggests persistent downward pressure on wholesale prices, potentially driven by several factors including market saturation, changing consumer demand, and economic conditions.

Price Trends

The consistent decline in the Manheim Used Vehicle Index reflects a broader trend in the automotive industry. After a period of elevated used vehicle prices, largely driven by supply chain disruptions and high new vehicle prices during the pandemic, the market is now experiencing a correction. This correction is characterized by decreasing wholesale prices, which are passed down to retailers and eventually to consumers.

Factors Contributing to Price Declines

  1. Market Saturation: An increase in the supply of used vehicles, partly due to more trade-ins and lease returns, has contributed to downward pressure on prices.
  2. Consumer Demand: Shifts in consumer demand, possibly influenced by economic uncertainties and higher interest rates, are affecting how much buyers are willing to pay for used vehicles.
  3. Economic Conditions: Broader economic factors, including inflation and interest rate hikes, impact consumer spending power and borrowing costs, leading to decreased demand for higher-priced used vehicles.

Implications for Dealers and Consumers

For dealers, the continued decline in wholesale prices may necessitate adjustments in inventory acquisition strategies and pricing models to maintain profitability. Retailers might need to offer more competitive prices to attract buyers, which could lead to slimmer margins but higher sales volumes.

For consumers, the downward trend in used vehicle prices presents potential opportunities to find more affordable options in the market. As wholesale prices drop, retail prices are also likely to decrease, providing better deals for those in search of used vehicles.

Stocks Affected By Slowing Used Vehicle Sales

The decline in used car prices has significant implications for various car and finance companies. The companies most affected by this trend are those with substantial exposure to the used car market, including those heavily involved in fleet sales, leasing operations, and used car dealerships. Here are some of the key players likely to be impacted:

1. CarMax

CarMax, one of the largest used car retailers in the United States, is highly sensitive to fluctuations in used car prices. A continued drop in prices can squeeze profit margins, as the company may need to reduce prices to stay competitive, potentially impacting revenue and profitability.

CarMax Inc Stock Overview

  • Average Analyst Target Price: USD 83.35 over the next 12 months based on forecasts from 12 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 4 positive signals and 9 negative signals.
  • Recent Stock Price: USD 71.36 at the last closing.
  • Stock Performance:
    • Increased by +1.52% over the past week.
    • Decreased by -1.67% over the past month.
    • Decreased by -9.20% over the last year.

2. AutoNation

As a major player in both new and used car sales, AutoNation’s used car segment could face challenges with declining prices. The company may experience pressure on its profit margins and inventory valuation, which can affect overall financial performance.

AutoNation Inc Stock Overview

  • Average Analyst Target Price: USD 180.00 over the next 12 months based on forecasts from 6 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 7 positive signals and 5 negative signals.
  • Recent Stock Price: USD 161.78 at the last closing.
  • Stock Performance:
    • Decreased by -3.79% over the past week.
    • Decreased by -5.21% over the past month.
    • Increased by +7.84% over the last year.

3. Carvana

Carvana, known for its online used car sales platform, relies heavily on the used car market. Lower used car prices could impact Carvana’s revenue and profitability, particularly if the company has to mark down inventory to match market prices.

Carvana Co Stock Overview

  • Average Analyst Target Price: USD 94.05 over the next 12 months based on forecasts from 9 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 5 positive signals and 8 negative signals.
  • Recent Stock Price: USD 109.85 at the last closing.
  • Stock Performance:
    • Increased by +2.91% over the past week.
    • Decreased by -6.51% over the past month.
    • Increased by +367.05% over the last year.

4. Lithia Motors

Lithia Motors, another large automotive retailer with a significant portion of its business in used cars, is likely to be affected by the declining prices. This could impact their sales revenue and margins in the used car segment.

Lithia Motors Inc Stock Overview

  • Average Analyst Target Price: USD 315.33 over the next 12 months based on forecasts from 8 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 6 positive signals and 4 negative signals.
  • Recent Stock Price: USD 248.34 at the last closing.
  • Stock Performance:
    • Decreased by -3.30% over the past week.
    • Decreased by -6.92% over the past month.
    • Decreased by -10.19% over the last year.

5. Hertz and Avis Budget Group

Hertz and Avis, prominent players in the car rental industry, regularly sell off used vehicles from their rental fleets. A drop in used car prices means these companies might realize lower proceeds from fleet sales, impacting their financial results.

Hertz Global Holdings Inc Stock Overview

  • Average Analyst Target Price: USD 7.23 over the next 12 months based on forecasts from 7 analysts.
  • Average Analyst Rating: Under-perform.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 5 positive signals and 10 negative signals.
  • Recent Stock Price: USD 3.51 at the last closing.
  • Stock Performance:
    • Increased by +3.24% over the past week.
    • Decreased by -33.27% over the past month.
    • Decreased by -80.27% over the last year.

6. General Motors (GM) and Ford

Both General Motors and Ford have substantial leasing operations. When lease contracts end, they often sell off returned vehicles as used cars. Lower used car prices can reduce the residual values of leased vehicles, leading to potential losses or lower profits from these sales.

General Motors Stock Overview

  • Average Analyst Target Price: USD 56.77 over the next 12 months based on forecasts from 15 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 5 positive signals and 8 negative signals.
  • Recent Stock Price: USD 47.77 at the last closing.
  • Stock Performance:
    • Increased by +0.25% over the past week.
    • Increased by +5.90% over the past month.
    • Increased by +28.00% over the last year.

Ford Motor Company Stock Overview

  • Average Analyst Target Price: USD 15.07 over the next 12 months based on forecasts from 9 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Bearish, based on 1 positive signal and 3 negative signals.
  • Recent Stock Price: USD 11.94 at the last closing.
  • Stock Performance:
    • Unchanged at +0.00% over the past week.
    • Decreased by -1.73% over the past month.
    • Decreased by -16.03% over the last year.

7. Tesla

Tesla’s foray into the used car market, particularly with trade-ins and its Certified Pre-Owned program, makes it susceptible to price fluctuations. Declining used car prices can impact the resale values of Tesla vehicles and the profitability of its CPO program.

Tesla Inc Stock Overview

  • Average Analyst Target Price: USD 211.70 over the next 12 months based on forecasts from 34 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 9 positive signals and 7 negative signals.
  • Recent Stock Price: USD 181.57 at the last closing.
  • Stock Performance:
    • Decreased by -0.49% over the past week.
    • Increased by +3.78% over the past month.
    • Decreased by -33.84% over the last year.

8. Vroom

Similar to Carvana, Vroom operates an online platform for buying and selling used cars. The company could face challenges related to inventory valuation and sales margins due to declining used car prices.

Vroom Inc Stock Overview

  • Stock Target Advisor Analysis: Bearish, based on 1 positive signal and 9 negative signals.
  • Recent Stock Price: USD 9.63 at the last closing.
  • Stock Performance:
    • Decreased by -2.53% over the past week.
    • Decreased by -17.34% over the past month.
    • Decreased by -89.80% over the last year.

9. Penske Automotive Group

Penske, which operates both new and used car dealerships, could see its used car business affected by falling prices. This could impact their overall financial performance, particularly in the segments heavily reliant on used vehicle sales.

Penske Automotive Group Inc Stock Overview

  • Average Analyst Target Price: USD 157.50 over the next 12 months based on forecasts from 2 analysts.
  • Average Analyst Rating: Hold.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 7 positive signals and 4 negative signals.
  • Recent Stock Price: USD 150.28 at the last closing.
  • Stock Performance:
    • Increased by +1.80% over the past week.
    • Decreased by -3.27% over the past month.
    • Decreased by -2.42% over the last year.

10. AutoCanada Inc.

AutoCanada is one of the largest multi-location automobile dealership groups in Canada. With a significant portion of its business coming from used vehicle sales, the company is sensitive to fluctuations in used car prices. Declining prices can impact AutoCanada’s revenue and profit margins, as it may need to adjust its inventory pricing to remain competitive.

Autocanada Inc Stock Overview

  • Average Analyst Target Price: CAD 23.40 over the next 12 months based on forecasts from 10 analysts.
  • Average Analyst Rating: Hold.
  • Stock Target Advisor Analysis: Bullish, based on 14 positive signals and 3 negative signals.
  • Recent Stock Price: CAD 19.79 at the last closing.
  • Stock Performance:
    • Decreased by -1.93% over the past week.
    • Decreased by -5.81% over the past month.
    • Increased by +2.59% over the last year.

11. Element Fleet Management Corp.

Element Fleet Management provides fleet management services, including vehicle financing and leasing. As fleet vehicles are cycled out and sold in the used car market, a drop in used car prices can affect the residual values and profitability of these transactions. Element’s financial performance may be impacted if they have to sell fleet vehicles at lower prices.

Element Fleet Management Corp Stock Overview

  • Average Analyst Target Price: CAD 26.79 over the next 12 months based on forecasts from 9 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 3 positive signals and 7 negative signals.
  • Recent Stock Price: CAD 23.99 at the last closing.
  • Stock Performance:
    • Decreased by -2.20% over the past week.
    • Decreased by -1.60% over the past month.
    • Increased by +17.08% over the last year.

12. ECN Capital Corp.

ECN Capital, involved in asset management services including vehicle leasing, could see its operations impacted by declining used car prices. Lower residual values on leased vehicles might affect their financial outcomes and lease terms.

ECN Capital Corp Stock Overview

  • Average Analyst Target Price: CAD 2.39 over the next 12 months based on forecasts from 5 analysts.
  • Average Analyst Rating: Hold.
  • Stock Target Advisor Analysis: Bearish, based on 3 positive signals and 9 negative signals.
  • Recent Stock Price: CAD 1.67 at the last closing.
  • Stock Performance:
    • Decreased by -6.70% over the past week.
    • Decreased by -11.64% over the past month.
    • Decreased by -44.15% over the last year.

13. Canadian Tire Corporation

Canadian Tire operates its own automotive services and parts divisions, which include used car sales through its network of dealerships. A decline in used car prices could impact the profitability of these sales and affect the company’s overall financial performance.

Canadian Tire Corporation Limited Stock Overview

  • Average Analyst Target Price: CAD 152.23 over the next 12 months based on forecasts from 10 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 5 positive signals and 11 negative signals.
  • Recent Stock Price: CAD 136.34 at the last closing.
  • Stock Performance:
    • Decreased by -1.42% over the past week.
    • Decreased by -5.43% over the past month.
    • Decreased by -22.03% over the last year.

14. Boyd Group Services Inc.

Boyd Group, a leading provider of automotive collision repair services, also deals with parts and services for used vehicles. While their primary business is not selling used cars, fluctuations in the used car market can affect demand for repairs and parts, indirectly influencing their revenue streams.

Boyd Group Services Inc. Stock Overview

  • Average Analyst Target Price: CAD 307.45 over the next 12 months based on forecasts from 13 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 9 positive signals and 6 negative signals.
  • Recent Stock Price: CAD 259.10 at the last closing.
  • Stock Performance:
    • Decreased by -0.83% over the past week.
    • Increased by +10.72% over the past month.
    • Increased by +4.28% over the last year.

Outlook

The trend of falling used vehicle prices, as indicated by the Manheim Used Vehicle Index, is expected to persist in the near term. Market watchers and industry participants will closely monitor how these changes impact both the wholesale and retail segments of the automotive market. Adjustments in supply chain dynamics, consumer behavior, and broader economic indicators will play crucial roles in shaping the future landscape of used vehicle pricing.

The mid-month Manheim Used Vehicle Index points to a continued decline in wholesale used vehicle prices, with a notable year-over-year decrease. As the market adjusts to these trends, both dealers and consumers will need to navigate the changing landscape, balancing supply, demand, and economic factors to optimize outcomes.

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