Are Vehicle Auction Prices On The Rise?

  • June 17, 2023
  • 3 min read

The used car market, known for its ever-changing landscape, is currently witnessing some noteworthy developments that are impacting both sellers and buyers. Let’s delve into the recent trends that are reshaping the dynamics of the used car auction scene.

Rising Auction Prices: A Seller’s Standpoint

One of the striking shifts in the market is the upward trajectory of auction prices. Contrary to expectations, auction prices are not softening; instead, they are climbing higher. The driving force behind this unexpected surge lies in the sellers’ strategy of setting low floor or consignment prices, often exceeding what buyers might be initially willing to pay.

The consequence of this approach is that only vehicles deemed worth the higher price tag by buyers are finding new owners. Interestingly, some vehicles are languishing on auction lots for extended periods—four or five auction cycles—before finding a buyer. Sellers are holding firm on their reserve prices, sometimes non-negotiable, due to factors like floor plans (lines of credit) that tether the prices to a higher level.

Challenges in Negotiation: Fixed Reserve Prices

In the auction arena, reserve prices, once set, are proving challenging to negotiate. Vehicles may receive bids with an “if,” indicating that they didn’t sell through the auction lane. In such cases, the auction company contacts the seller to explore whether they would accept the last bid or engage in negotiations. However, many sellers are maintaining their pricing positions, often constrained by existing financial obligations tied to the vehicle.

Quality Vehicles Commanding Premiums

Buyers, seeking high-quality, desirable vehicles, are discovering that they must be willing to meet the elevated prices set by sellers. The perception that used cars would see a dip in prices due to increased availability following a surge in new car inventory has not materialized as expected. Instead, auction reports indicate that floor and reserve prices are holding steady, if not inching upward.

Impact of New Car Prices on Used Cars

An intriguing factor contributing to the resilience of used car prices is the escalating cost of new vehicles. The demand for certain used models remains robust, even when the new iterations of those models command significantly higher prices. For instance, a used Jeep Gladiator Rubicon from 2020, with an original sticker price of $52,000, still commands a considerable sum, even with a wholesale auction price of around $42,000 to $43,000. This is because the new 2023 model of the same vehicle boasts a staggering sticker price of $78,000, making the used version a more appealing and affordable option.

A Market in Flux

As we observe these trends, it’s evident that the used car market is navigating a complex landscape. The usual expectations of softening prices with increased availability have been challenged, and sellers are holding their ground. Buyers, in turn, are adjusting to the new normal, recognizing that securing top-tier used vehicles may come with a higher price tag. As we keep a close eye on these market dynamics, the resilience of used car prices remains a notable aspect of the evolving automotive landscape. Stay tuned for further insights as the market continues to shape its trajectory.

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