Wholesale used car prices declined for the first time this year. According to April’s latest Manheim Used Vehicle Value Index, prices decreased 3% from March and 4.4% from a year ago.
“We’ve experienced eight straight months of year-over-year declines, averaging 8.3%, and it’s likely not over yet,” stated Chris Frey, senior manager of economic and industry insights for Cox Automotive.
Pre-owned values inflated during the onset of Coronavirus, and the short supply of new vehicles drove unprecedented demand in the used car market. Meaning the year-over-year declines in wholesale used car prices indicate a return to pre-pandemic conditions rather than waning demand.
The previous monthly reports from February and March revealed a significant increase in used car prices during the first quarter of the year, surpassing industry forecasts. While some gains were expected due to tax season, the surge in prices exceeded expectations. The surge is likely linked to the ongoing tight supply of new car inventory.
“Prices have been falling, but the tight supply might be providing some price support,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Used prices may fall further, but it seems unlikely a massive decline will happen given the supply situation.”
An analysis of vAuto data echoes this sentiment. The supply of used cars in retail lots represents an eight-day decrease from the same time last year. Meanwhile, wholesale supply for April was at 25 days, which is a slight increase of two days from March but a decrease of one day compared to April 2022.
Jonathan Banks, the vice president and general manager for vehicle valuations at J.D. Power, explained, in a recent interview with CBT News, that only a few legacy brands continue to offer affordable, leaving shoppers with few options.
“Used vehicles are still a good substitute for new. There’s still not that many new [cars] available. People need cars. We have a really great labor market—which, now I’m hearing that it’s going to keep us from having a dramatic recession. Hopefully, it’s true that we have a soft landing from a recession, but now we have crazy used car prices. I’ll take that trade-off.”
While used car prices remain historically high, further declines could permeate the retail market. According to estimates by Cox Automotive and vAuto, used-vehicle retail sales dropped by 8% month-over-month in April, and average listing prices in the used car market have steadily risen.
