Wholesale Used Car Prices Rise 8.6%

If it seems that used car prices are rising, you’re right. 

According to the Manheim Used Vehicle Value Index, used vehicle values rose 8.6% in the first quarter of 2023, wholesale used-vehicle prices rising 3.5% in March from February, although prices decreased 2.9% year over year. In fact, March was the fourth consecutive month of price increases. But don’t expect that to continue.

“For the first time in a long time, our midmonth Manheim Used Vehicle Value Index reading for the first half of March was actually way more positive than the final value,” said Cox Automotive Chief Economist Jonathan Smoke.

“Based on full-month data and other key metrics, we definitely think conditions are weakening. March came in like a lion and went out like a lamb regarding wholesale vehicle values. After four months of seasonally adjusted gains and 11 straight weeks of price increases, March was a turning point. So, April will likely continue the downward trend we saw as March ended, and we expect to see some negative monthly moves ahead for the index.”

Prices fell, but remain higher overall

In March, seasonally adjusted wholesale used-vehicle prices were lower year-over-year in seven of the eight key market sectors, with the exception being pickup truck prices, which saw a 0.8% rise in March.

The remaining seven segments saw falling values last month, with midsize and compact cars falling less than the other segments, losing 1.4% and 2.2% of the value respectively. In contrast, luxury cars fall an astounding 8%, while other segments fell anywhere from 2.7% to 3.8%. But prices in six categories were up as much 2.1% versus February 2023. Vans prices remained unchanged, while sports cars lost 1.6% in March compared to the previous month.

Falling prices didn’t reflect a lack of shoppers, as retail sales rose 13% in March from February, but weren’t as robust as is usually seen during the month, as sales were 6% lower for the month compared to the same period the year before. 

But retailers are also working with lower inventories, ending the month with a 38-day supply of cars, down from 43 days at the end of February and nine days lower year-over-year.

A growing segment

Interestingly, used electric vehicle sales, those EVs sold through a licensed dealership, Jumped an astounding 32% year-over-year in the first quarter to 42,753 units, now accounting for 1% of used vehicle sales. To put that in perspective, that’s twice the volume sold in the first quarter of 2021. In fact, according to Cox Automotive, new EV sales in the U.S. are expected to top 1 million units for the first time in 2023, which could explain the increasing number of used EVs being sold. 

Consider that EV sales claimed a 6.7% market share in the first quarter of 2023, up from 5% the year before and 2.4% in 2021. And the average transaction price for them continues to fall as well, declining to $59,668 from $66,369 in the first quarter of 2018. But whereas EVs once commanded an 83% price premium versus the price of all cars, that’s fallen to 23% in the first quarter of this year. That’s mostly due to the huge increase in the average transaction price of all cars, which rose to $48,640 in the first quarter, up 25.3% from $36,314 in the first quarter of 2018.

The outlook for the rest of 2023

According to analysts at Manheim’s parent company, Cox Automotive, the used vehicle retail sales outlook for the rest of year remains flat, with used-vehicle sales seeing less than 1% growth, which was revised upward from December 2022, when the company was forecasting a 4% sales decline. 

This comes as March new vehicles sales proved strong, up 8.6% in March 2023 vs. March 2022. Last month’s new-vehicle sales volume soared 19.3% from February. That translated into a seasonally adjusted annual rate of 14.8 million units, a 9.3% jump from 2022’s 13.6 million, but down 1.2% from February’s revised 15 million pace. Fleet sales were very strong, up 28% year over year in March. Sales into rental fleets rose 46% year over year, sales into commercial fleets increased 7%, while sales to government fleets grew 39%.

“By historical measures, that is a slightly less-than-normal year, but certainly trending toward normalcy,” Smoke said.

“Our forecast assumes some negative months this spring and summer, so it will be a bumpy ride. The strong start to the year is a clear testament to what a very supply-constrained market is capable of seeing with just a modest improvement in demand.”

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• Source: https://www.thedetroitbureau.com/2023/04/wholesale-used-car-prices-rise-8-6/