Used vehicle prices at auction were stable month-over-month in March but declined sharply from last year, following months of normalizing inventory levels in both the new and pre-owned markets.
Cox Automotive reports that last month’s wholesale used car values dropped 14.7% from March 2023, when supplies were still heavily constrained due to the impacts of the COVID-19 pandemic. Compared to February 2024, however, the decline amounted to just 0.4%.
Value retention, on an annual basis, varied heavily between segments, with losses ranging from nearly 20% for electric vehicles to only 13% for luxury models. EVs have seen some of the worst price cuts across the market, although the vast majority of the decline has been driven by Tesla.
Although these shifts have placed more pressure on dealership profit margins, the drop in price appears to have coincided with an increase in demand. Retail used vehicle transactions rose 7% from last year and 6% from February, which was already a surprisingly strong sales month.
This is hardly a surprise. In a market long deprived of affordable options, improving affordability typically guarantees an increase in demand. In this case, used vehicle prices have come down, driving up sales and convincing more dealers to seek out wholesale acquisitions.
That said, the decline in used car values signals the gradual return to pre-pandemic norms in the pre-owned vehicle market. Careful inventory management and creative acquisition strategies in the coming months will be critical to offsetting losses created by weakening prices.
