March 20, 2023 | Market Insights from Collin McConkey
In December we forecasted a stronger Q1 market as we looked toward the new year with optimism. None of us anticipated the rocket ship of a market that we are now riding. In the last few weeks, we have seen a massive increase in demand as the supply of new cars seems to plateau even further below market equilibrium. It is not just the belabored chip shortage – delays in shipping and logistics are causing automakers to reduce their production targets, leading to lower inventory levels at dealerships.
This current market flare-up feels so reminiscent of last spring’s boom. And while we can all share in the success of the market rise, we need to remember that what goes up must come down. Incredibly erratic market swings expose us all to risk. During the past two sales, I have witnessed units that did not sell the first week of March now selling for $5,000 – $8,000 over their line prices. While retail is up and used car prices are skyrocketing, I believe we are in an erratic and reactionary market rather than a stable, healthy one.
The used car market has felt like a ping-pong match lately, going back and forth with the pace getting faster and faster. The gaps in our market spikes are getting closer together and as a result, we have seen some dealers get caught on the wrong end of a spike with no time to manage losses. At the same time, we know that retail demand is driving frenzied buying behavior. Dealers who keep a short turn time and are willing to take small front-end losses are faring well as they keep their money turning and find opportunities for backend revenue. Those who are unwilling to take any loss end up sitting on their product longer and risk getting caught at the bottom end of a volatile market. Those who take calculated risks and turn their inventory quickly can operate within the current market conditions.
We strive to provide a stabilizing environment where you can see what the market is doing every week. Those who are paying close attention to their businesses rather than getting caught up in the inflammatory headlines surrounding us seem to be thriving in this ping-pong match of a market.
Thank you for your continued support and partnership. Regardless of market swings, we’re here for you whether it is in our physical lanes, on Edge Simulcast, or MAG Now.
General Manager, DAA Northwest