At the Roger Beasley South dealership lot in Austin, Texas, on June 7, 2023, pre-owned vehicles are on display.
Photo: Brandon Bell | Getty Images
In Detroit, wholesale used vehicle prices recorded their most significant drop since the start of the Covid-19 pandemic. This decline indicates a stabilization of prices in the second half of the year.
Cox Automotive reported on Monday that its Manheim Used Vehicle Value Index fell by 4.2% from May to June, reaching a value of 215.1. This represents the third consecutive monthly decline and one of the largest monthly drops in the history of the index.
Chris Frey, Cox’s senior manager of economic and industry insights, stated, “Buyers at auction seem to have taken an early summer break. While used retail inventory has been improving over the past few weeks, we anticipate less volatility in wholesale price movements for the rest of the year.”
The index, which monitors vehicles sold at U.S. wholesale dealership auctions, remains higher than historical levels but is down 10.3% compared to June 2022.
This decline in wholesale prices is likely to influence retail prices in the coming months, bringing down costs for consumers. Traditionally, retail prices follow changes in wholesale prices.
According to Cox, the retail used vehicle market remains strong but experienced an estimated 6% decrease compared to June 2022. This decline is primarily due to higher availability of new vehicles and increased interest rates, as explained by Jonathan Smoke, Cox’s senior economist, during a conference call.
Used vehicle prices have remained high since the early days of the Covid-19 pandemic. The combination of the global health crisis and supply chain disruptions caused intermittent production halts for new vehicles. This scarcity of new vehicles, along with strong consumer demand, led to high prices in both the new and used car markets.
Cox predicts that wholesale used vehicle prices will decrease by approximately 1.1% by the end of this year compared to December 2022. This forecast has been revised from an initial expectation of a 4.3% decline, reflecting the stronger-than-expected pricing and demand earlier in the year.
“The consumer is holding on,” said Smoke. “We do not anticipate seeing declines like those experienced in the spring during the remaining months of the year.”
Cox expects a “slow and gradual recovery” in prices in the used vehicle wholesale market, with prices returning to pre-pandemic levels by 2028.
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