PPO Morning Market Update — Inventory Rises, Demand Shifts, and Dealers Get More Selective

The used-car market continues to normalize, and today’s story centers on rising supply, selective consumer demand, and tighter pricing discipline across the industry.

Used-Car Inventory Climbs to Multi-Month Highs

Dealers are reporting some of the highest used-vehicle inventory levels of 2025. Days’ supply is expanding as more units return to market through off-lease, trade-ins, and stabilized new-vehicle production. This offers more choice for shoppers — but also raises the risk of aging inventory for operators who lose pricing cadence or merchandising discipline.

Demand Shifts Toward Value Segments

Affordability continues to shape buyer behavior. Consumers are gravitating to compacts, hybrids, and value-priced units while showing less appetite for higher-priced used vehicles. This shift is tightening competition in the sub-$20k space and rewarding dealers who have the right pricing strategy and merchandising clarity.

Retail Performance Splits Across Operators

Recent performance reports highlight the divide between large used-only retailers and franchise groups. CarMax reported declining used revenue and margin pressure, while franchised groups with consistent trade flow — like Sonic — are faring better.

Market takeaway: operational breadth and sourcing diversity now matter more than ever.

Dealers Lean on Pricing Discipline, Not Big Markdowns

Despite rising inventory, we are not seeing widespread price slashing. Dealers are:

• Maintaining tighter pricing cadence
• Using real-time demand signals to guide adjustments
• Watching wholesale values closely
• Avoiding unnecessary gross erosion

The message is clear: execution beats aggression.

Macro Pressure Still Shapes the Shopper

Elevated monthly payments and high financing costs are keeping shoppers firmly in the used lane — but they’re entering the funnel more skeptical, more selective, and more dependent on online comparison tools.

Result: clear pricing, transparent condition reporting, and strong merchandising matter more than ever.

PPO Bottom Line

The days of easy used-car margins are over. This reset rewards operators who:

• Manage aging relentlessly
• Price with precision, not panic
• Understand shifting demand toward value segments
• Execute on SRP/VDP storytelling and clarity

Inventory is rising. Demand is still there — but it's pickier. Tight operators will win market share in this new normal.

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