What the latest Manheim Used Vehicle Value Index reveals about the used car market – Jonathan Smoke of Cox Automotive

On today’s show, we’re pleased to welcome Jonathan Smoke, Chief Economist for Cox Automotive. He discusses the Manheim Used Vehicle Value Index and the used-vehicle market. The Manheim index tracks what’s selling at Manheim. The monthly value report reflects the average price dealers are paying for used vehicles at auctions. It allows analysts to see, what car dealers are paying for their most expensive inventory.

The July Manheim Used Vehicle Value Index was recently published and shows that used-vehicle values are finally coming down off a record high. In the latest report, prices also continue to be up substantially year-over-year, and that’s across all major segments. However, prices in July were down, following most segments being down in June, says Smoke. As a result, all prices are well-off of the peak year-over-year increases, they had in the Spring.

Smoke says they are seeing some important shifts in how the segments have been performing. Pickup trucks have risen the most over the past year, and are now falling the most. Luxury vehicles are holding their value quite well. Smoke says, what they’re seeing is, segments that increased the most over the last year in the Spring, are falling the most now. Smoke adds, the industry had the most extreme imbalance ever seen this past Spring. 

Smoke believes the Spring frenzy is now over. Prices are a self-regulating mechanism and are rolling over. Smoke says we’re returning to what he calls a fairly predictable depreciation pattern. He also says no one should be waiting for a major drop in values. We’re seeing the balance in the wholesale market.

We have seen record-high retail used-vehicle prices as well. Wholesale prices typically lead retail prices by about six weeks on average. The data reveals that the whole markets peak in June, with retail peaking just a few weeks ago, in the second half of July. Both are declining like they typically do around this time of the year.  

As far as sales and inventory levels of used vehicles with these elevated prices, Smoke says, sales have cooled off from the frenzy. He predicts that July will be one of their softest months, compared to what sales were back in 2019. Inventory started to improve in the used market and Smoke thinks, we’re getting closer to normal supply levels for this time of the year. Looking forward, the used market will be very well positioned. It’s important to acknowledge that 2019, before this year, was the best year in history for used retail sales.  

Smoke ends the conversation by advising dealers as they close out the Summer. Smoke says, car dealers should continue focusing on their used car departments. They will sell fewer vehicles in the back half of the year, compared to the incredible Spring we’ve had. He also says, don’t plan and manage your inventory at pricing the same way that you did in the Spring.

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