The sky is not falling in the used-car market, but certainly the expectation is for another challenging year in sales.

Brighter days may be on the horizon, but the year appears to have started on a bumpy note.

TrueCar is forecasting close to 2.5 million total used-car sales for January, which would be a 21% year-over-year decrease. It would be steady with December’s figures.

Projections from earlier this month indicate that while full-year used-car sales are likely to decline again, there will be some moderation in the severity of that decline. 

In a mid-January presentation with the industry and media, Cox Automotive projected overall used-car sales of 35.6 million for 2023, which would be down from 36.2 million in 2022. Retail used-car sales (or those originating at a dealership) are expected to fall from 19.1 million last year to 18.9 million this year.

“Affordability will remain a challenge, especially for subprime and lower-income buyers,” Cox Automotive senior manager of economic and industry insights Chris Frey said in that industry call.

Frey also pointed out that fewer consumer trade-ins to buy newer used vehicles means there will be less retail volume available for dealers to sell.

However, he said, “While we reduced both used forecasts, we’re not expecting the bottom to drop out of the used market.”

In fact, the approximate 1% forecasted decline for both overall and retail used-car sales for 2023 is a noted improvement from the 10% drops during 2022, Cox Automotive chief economist Jonathan Smoke said on the call.

Still, the used-car market is likely to experience more stress this year than new.

“A slowing economy translates into a slight decline in total retail sales, but with improving new-vehicle deliveries and the most stress actually on the used-vehicle market,” Smoke said.

The used-car market is facing the double-edged challenge of slowing demand as well as short supply on later-model vehicles, Smoke said.

That bears out most significantly in the certified pre-owned market, which Cox anticipates will take the biggest hit in 2023.

The company is projecting 2.2 million CPO sales for the year, down 11% from 2.47 million in 2022.  

Cox said this would be softest CPO figure in a decade.

“Certified pre-owned sales will fall the most, as the drop in off-lease volume that feeds this critical part of the used market hurts the potential for market volumes anything like we’ve experienced for most of the last decade,” Smoke said.

In a separate Data Point report, the company noted: “While demand can support more CPO, the market will ultimately be limited because of supply constraints. In 2023, the used market and CPO will likely decline further. Interest rates are expected to be at levels not seen in more than 20 years.

“The economy is expected to slow because of higher rates and tighter credit conditions,” it continued. “And, maybe most importantly, the supply of younger vehicles that can be certified will be down dramatically as the large declines in sales and leases since March 2020 factor into the available used-car supply.”

And it may not get much better in coming years.

According to data shared by J.D. Power’s Jonathan Banks on Thursday in Dallas at the J.D. Power Auto Summit, off-lease supply is expected to fall 12% this year, then 6% in 2024 and another 10%  in 2025.

The declines in off-lease supply — which tends to feed CPO programs — have been more significant than the drops in the overall market, Banks said.  

That certainly will limit CPO sales, but the overall used-car market could see some improvement next year.

Cox Automotive anticipates growth in both overall used-car sales and retail used-car sales for 2024. It is projecting 36.4 million overall sales and 19.5 million originating at dealerships.