The used car prices surged substantially in the past couple of months, leading to a decline in sales. However, strong consumer demand and limited new car production should allow AutoNation (NYSE:AN) and Group 1 Automotive (NYSE:GPI) to grow substantially in the near term. However, fundamentally weak used car stocks Carvana (CVNA) and CarMax (NYSE:KMX) are best avoided now.Used car prices surged to record highs in the second quarter of 2021 amid multi-year high inflation, causing sales to decline. However, prices are dropping lately, which should elate potential buyer interest and boost car sales. According to a comprehensive research report by Market Research Future (MRFR), the used car market is projected to grow at a CAGR of 5.61% between 2021 and 2027.
The robust domestic demand and consumer spending amid the sluggish new car production should drive the used car market’s growth in the near term. As a result, AutoNation, Inc. (AN) and Group 1 Automotive, Inc. (GPI) is well-positioned to benefit substantially.
However, with bleak financials and limited growth prospects, used car stocks Carvana Co. (NYSE:CVNA) and CarMax, Inc. (KMX) are best avoided now.