CARY, N.C. -

Used-vehicle retail sales have struggled in the first half of the year, amid challenges from the COVID-19 pandemic. But bright spots have emerged, including what looks to be strengthening franchised dealer used-car sales in the first half of June, as of press time for this publication.

Just consider these data points from KAR Global’s interactive dashboard.

Used-car retail sales for March 31 were down 60.1% year-over-year. On June 8, they were up 21.5%

Overall, in May, there was a 22.4% year-over-year decrease in overall used-vehicle sales, with new-car sales falling 30%, according to Cox Automotive.  But sales did strengthen from April.

The company estimated the overall used-vehicle SAAR for the month at 32.0 million. In May 2019, it was 39.2 million, and in April, it was 27 million

What Cox considers to be the retail used-vehicle SAAR (or sales by franchised and independent dealers only) was at an estimated 16.7 million in May. In May 2019, it was 21.0 million. In April, it reached 14.4 million, so May did mark a month-over-month improvement.

“Overall, used-vehicle demand continues to improve, which has helped stabilize wholesale vehicle prices and reduce the excess supply of used vehicles,” Cox said in an analysis. “The wholesale used-vehicle supply peaked at 149 days on April 9, when normal supply is 23. It was down to 39 days by the end of May.”

Over at J.D. Power, analysts were noticing similar trends. In an early June webinar on that week’s J.D. Power Auto Industry Impact Report, analyst Larry Dixon said: “Used-vehicle sales at franchised dealers have been robust for several weeks now. May closed with used retail sales down just 5% from our pre-virus forecast for the month or 15 percentage points better than new-vehicle sales.

“Sales in several major markets have especially strong, including Dallas, Phoenix, Cleveland, Denver and Tampa,” said Dixon, who is senior director at J.D. Power Valuation Services.

“Dealers in these markets will need to replenish used retail inventory, which will in turn, help support wholesale auction activity and wholesale prices,” he said.

In comments included in an emailed summary of the report’s highlights, J.D. Power vice president of data and analytics Tyson Jominy wrote: “The strong demand for used vehicles is consistent with prior periods of challenging economic conditions.

“Less compelling incentives on new vehicles will further bolster demand for used vehicles and a significant number of households who would have purchased a new vehicle are switching to the used market due to affordability concerns,” Jominy said. “Reduced new-vehicle incentives will also remove a headwind to the maintenance of strong used-vehicle wholesale and retail prices.”

In a Used Vehicle Impact Report looking at the week ending June 14, J.D. Power indicated that franchise dealers’ used-vehicle sales were 11% stronger than what was projected pre-virus. That followed a week when they were up 12% from pre-virus forecasts, beating prior weekly movements, when they fell 3% the week ending May 31 and were static the week of May 24.

“The strong demand for used vehicles is consistent with prior periods of challenging economic conditions,” J.D. Power analysts said in that report. “Further, reduced incentives on new vehicles drove up monthly payments, which further bolstered demand for the affordability of used vehicles.”

Used-vehicle affordability, and slowing new-vehicle supply, was something that Cox Automotive senior economist Charlie Chesbrough addressed in an AIADA AutoTalk webinar in early June.

“There is a lot of activity in the used market. And I think that’s where we’re going to see probably the most activity over the course of the summer, particularly as the new market is facing sort of a new hurdle, which is inventory supply,” Chesbrough said.

He later added: “I think the used market is going to be a real focal point for consumers here over the course of this summer.”

One potential opportunity for the used-vehicle market is the downturn in car segments on the new-vehicle side.

Cars represented less than 23% of the new-vehicle market in May, according to data Chesbrough shared in the webinar.

While some of the overall declines for sales is attributable to several automakers moving away from the car segments and not producing as much, even the car segment product that is available is not generating strong new-vehicle sales, Chesbrough said.

“It may be that those car buyer consumers have been hit by this virus particularly hard and they’re being chased out of the new-vehicle market,” he said. “Unfortunately, I don’t have hard data to defend this, but if I had to speculate, I think that there is some real opportunity within the used-car market that these car buyers are seeing value to get a 3-year-old SUV that (they) couldn’t afford in the new market, but (they) could afford it in the used market.

“And so, when I’m looking for a less-than-$30,000 product, I think many of those consumers are leaving the new-car segment and moving into the used SUV segment.”

There’s also a lot of potential in what Cox Automotive describes as the “gently used” segment, or vehicles zero to 4 years old. These vehicles are typically higher-priced and many of their buyers can afford to buy new but chose to purchase used, instead.

When looking at the combined sales tally of new-vehicle sales and gently used vehicle sales, the share commanded by gently used has been on the rise since 2013, when it was just over 33%, according to Cox Automotive. This year, their share is expected to reach close to 44%.

Amid the rising new-vehicle prices and fewer products under $30,000, “the way they’re providing that price point to consumes out there is in the used market,” Chesbrough said. “That if you’re looking for a low-cost vehicle, well, the industry’s saying you’ve got to into the used market to get that.

“So, as a result, there’s a lot more business that’s happening” in the pre-owned market.

And with consumers now focused on value and deciding to spend less, “these gently used vehicles may become a real threat to the new-vehicle market, because I can buy a 3-year-old version of a new vehicle for a 30, 40, 50% discount.”

And often those 3-year-old or other later-model vehicles end up as certified pre-owned vehicles, which was one of the bright spots in May’s used-car market.

According to a Cox Automotive analysis of data from Motor Intelligence, there were 237,495 CPO sales for the month.

While that’s down 6% from May 2019, the May 2020 certified sales tally is 87% stronger than April’s, Cox said.

What’s more, that year-over-year decline in May is a substantial improvement over the 46% year-over-year decrease in April. In March, certified sales were down 40% year-over-year, according to the Cox analysis of Motor Intelligence data.

That followed what was another record start to the year.

The first month of 2020 was the strongest January for the certified pre-owned market in a decade, according to a previous report from Cox covered in Auto Remarketing. February then beat those sales by 10%.

Year-to-date sales CPO are at 977,333 units, a 16% decrease, according to latest analysis.

More than two-fifths (44%) of those sales are from Toyota, Honda, Chevrolet, Ford or Nissan, Cox said. A third come from Toyota, Honda or Chevrolet, with those brands representing the largest players in the CPO market, according to the analysis.