It comes as no surprise that used car values continue to climb. With the shortage of new cars due to the microchip and other manufacturing supply shortages, used cars are in high demand. Retention rates are basically how much value a car is retaining since it was new.
Black Book is a wholesale/auction price guide that many car dealers use to value prospective inventory. Black Book provides information on retention values, which they call, The Black Book Retention Index. To calculate retention values they use the wholesale average value of two to six-year-old cars as a percentage of their original MSRP (Manufacturer Suggested Retail Price). On November 3rd they published their retention index for October 2021, stating it is currently 38.8% higher than the same time last year.
“With no short-term resolutions to new inventory problems, dealers are continuing to spend money on used inventory, pushing wholesale prices up to new records across all segments in October. As in September, cars of all sizes and compact crossovers led the rally. Average price of a used vehicle is 39% above 2020 levels and 56% above the pre-COVID 2019 level. Although we don’t expect this level of prices to be sustainable for the long-term, we expect the used car market to remain strong for several years due to limited new inventory and reduced availability of used supply,” said Alex Yurchenko, Chief Data Science Officer at Black Book.
Naturally, when wholesale prices increase, retail prices increase. Market data analysis indicates we are in a seller’s market and will continue to be for a very long time. It’s not a good time to make an automobile purchase, new or used. Of course, many times we have no choice. Cars wear out or become damaged beyond repair. Buyers need a strategy that will allow them to get the best deal they can in this unusual market. If you find yourself in this situation we are here to help, contact us any time.
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