Wholesale Used Car Prices Experience Slight Decline, Indicating Cooling Demand

Wholesale Used-Vehicle Prices Show Modest Dip

Recent reports suggest that wholesale used-vehicle prices have seen a slight decline, indicating a potential cooling off of demand. However, this dip is not significant enough to warrant rushing to automotive auctions or waiting for substantial savings at dealerships.

Manheim Index and Black Book Report

The Manheim Index, which tracks wholesale used-vehicle pricing for Manheim auctions, dropped by 2.3 percent in October, according to Cox Automotive. While this decrease indicates lower rates compared to September, it is still far from the pre-2020 spike in secondhand car valuations.

Black Book also reported that higher than typical seasonal wholesale price depreciation resumed in the first week of November. Although the weekly difference was less than one percent, it exceeded analysts’ expectations, suggesting a steeper desperation curve.

Possible Factors for the Price Change

The reasons behind this price change are difficult to pinpoint. The automotive market has experienced exceptionally high new and used car prices for an extended period. Additionally, vehicle production has been unreliable since 2020, and a significant portion of the American population is facing affordability challenges. However, Cox and Black Book suggest that the end of the UAW strike may have played a meaningful role in the price decline.

“The UAW strike appears to be settled, avoiding one action that could have led to higher wholesale prices,” said Cox Automotive Senior Manager of Economic and Industry Insights Chris Frey.

Impact of Interest Rates and Vehicle Affordability

Cox Automotive Chief Economist Jonathan Smoke highlighted the potential impact of interest rates in the fourth quarter and beyond. If interest rates rise, vehicle affordability could worsen, leading to a decrease in consumer demand.

Smoke stated, “This is really something not dissimilar to the early days of the pandemic where we basically need to monitor what’s happening week to week in terms of the supply and the buying activity we see in the market and how that’s manifesting in both new and used prices.”

Market Volatility and Consumer Preferences

The current market is highly volatile, with many families facing financial struggles. While new vehicle inventories have increased, they remain around 60 days’ worth of supply for most brands. This level is higher than recent years but lower than pre-pandemic averages. However, the supply of electric vehicles (excluding Tesla models) is estimated to be around a 105-day supply.

In contrast, retail used-vehicle supply in the U.S. stood at 49 days in October, down from 50 days in September and 54 days in October 2022. This decrease suggests that consumers are turning to the second-hand market due to limited options within their price range.

Long Road to Recovery

Despite the decrease in prices this year, the average used vehicle still lists for just below $30,000. This pales in comparison to the average new vehicle prices of $39,000 in late 2019 and $48,000 throughout 2023. The auto market remains broken, and it will take time to return to past averages.

[Image: Gretchen Gunda Enger/Shutterstock]

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