Vroom Says ‘Aged’ Cars Made Up 80% of Sales
BY PYMNTS | AUGUST 9, 2023
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Online car-buying platform Vroom said its inventory troubles should turn a corner later this year.
As PYMNTS reported earlier this year, Vroom and other companies in the industry were battling with a glut of “aged” vehicles, or used cars that had been in their inventory for 180 days.
Vroom CEO Tom Shortt said the company is continuing on that path during a second-quarter 2023 earnings call Wednesday (Aug. 9).
“As we execute our strategy in 2023, we are resuming responsible growth, selling through aged inventory, improving variable costs per unit, continuing to reduce fixed costs, and converting balance sheet items into cash,” he said. “Our long-term roadmap remains unchanged.”
Part of that roadmap involves the company shedding its aged vehicles, which accounted for 80% of sales during its second quarter, compared to 77% in the previous quarter.
However, Shortt stressed that this issue is a short-term one, with that 80% figure expected to drop by nearly half in the next quarter, and again in the next.
“And after the fourth quarter, we probably won’t be talking about it,” he said.
During this quarter, however, Vroom “realized the negative impact of selling through aged vehicles, which was approximately $11 million,” Chief Financial Officer Bob Krakowiak said. “This impact was offset by [gross profit per unite (GPPU)] in excess of $5,000 on unaged units.”
Meanwhile, the retail price of used cars could soon start to come down, after June saw the largest decline in wholesale prices since the pandemic began.
“Buyers at auction look to have taken an early summer break, and while used retail inventory has been improving over the last several weeks, we are expecting less volatility in wholesale price movements through year-end,” Chris Frey, senior manager of economic and industry insights at Cox Automotive, said in July.
Jonathan Smoke, senior economist at Cox Automotive, noted that the situation is “now at a turning point where the market returns to more balance and that balanced market is likely to deliver small but predictable changes in sales and less news about big changes in prices.”
Smoke pointed out that the rate of decline in the remainder of the year is not anticipated to be “like we saw in the spring,” with used vehicle prices expected to drop roughly 1.1% at the end of this year versus December 2022
