QI TAKEAWAY — Used vehicle deflation is happening upstream and should travel down to the CPI level in coming months. Stock-price collapses for online operators in the used vehicle industry point to fire sales to come. Tread as if in a minefield around lenders and vendors in the space.
- Year-to-date, Carvana and Vroom are down 97% YoY and 91% YoY, respectively, as used car prices continue to spiral downwards; while every month from April 2021 to April 2022 saw CPI for used vehicles north of 20%, this only occurred in 3% of months from 1953-2021
- Manheim’s Used Vehicle Index had a 2.2% seasonally-adjusted MoM decline in October, equating to -10.6% YoY; all major market segments saw prices fall, and post-pandemic, the series has led CPI by two months with a stout 0.96 correlation, signaling more relief to come
- Transunion reported 60+ day auto loan delinquencies rising to 1.65% in Q3, the highest in over a decade; with more than 100,000 of these loans still in COVID-era forbearance programs, fire sales may be on the horizon, as seen by Carvana’s CDS curve inverting