NADA watching out for negative equity problems in 2023

Used-vehicle wholesale prices will continue to fall through 2023 as the coronavirus pandemic fades, NADA’s top economist said, but negative equity could become a new point of concern.

“I’ve heard some anecdotal stories, and I am sure many of the dealers out here have [their] own anecdotal stories as well about people coming in very underwater,” NADA Chief Economist Patrick Manzi said at a press conference Saturday. “This is going to be one of the things that I am paying close attention to.”

Manzi predicts overall industry light-vehicle sales of 14.6 million in 2023, 6.6 percent higher than 2022.

He anticipates fleet sales will rise this year as vehicle availability improves, with an estimated 2 million to 2.1 million fleet vehicles sold in 2023. That would be an increase from his estimate of 1.9 million fleet vehicles sold in 2022.

“These fleet buyers have been starved for cars. They haven’t been able to get the amount of inventory they would like,” Manzi said. “Even if you were to see some sort of consumer pullback on the retail side, there are plenty of fleet buyers out there willing to take those vehicles.”

Manzi forecast that incentives will remain relatively low in 2023, despite a small rebound in December. While average incentives peaked at $4,723 per vehicle in the spring of 2020 at the very start of the pandemic, they were less than $1,000 during the first part of last year before rebounding slightly to $1,256 at the end of 2022, according to NADA data Manzi cited.

“There are incentives out there for a few brands, but by and large incentives are still very low,” Manzi said. He added that they should grow a bit higher through 2023, however, as vehicle supply improves.