Used Vehicle Prices Drop in April

The price of used vehicles faltered and dropped again during April, despite wholesale numbers rising as the inventory of used vehicles dropped compared to the year-ago period.

According to the latest data from Manheim Used Vehicle Value Index, which tracks pricing data from Manheim auctions of used vehicles around the country, wholesale prices were down 4.4% from a year ago.

Analysts from Cox Automotive, which is the custodian of the Mannheim Index, noted wholesale used vehicle prices saw a “sizable decline” last month. The wholesale price of used vehicles on a mix, mileage, and seasonally adjusted basis 3% in April from March. 

Value continues to slide from peak

“While values increased 8.6% through the first quarter from December, the market has reversed course in April, with our monthly figures showing a month-over-month decline for the first time in 2023,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive.

“Values in April also continue to be lower year over year. We’ve experienced eight straight months of year-over-year declines, averaging 8.3%, and it’s likely not over yet. During the financial crisis, we had 16 months of annualized declines, averaging 5.8%. 

“Though I’m not predicting doom, we’ve surely started a second, and more rapid, decent off the pandemic peak of January 2022,” he added.

All segments lose value on the used market

All eight major market segments saw seasonally adjusted prices fall on a year-over-year basis in April. Compared to last April, pickups, compacts and midsize cars lost less than the industry, at 0.2%, 3.4%, and 3.9%, respectively. 

The luxury space lost 9%, and the remaining three segments declined between 5% and 7%. Compared to last month, four of the eight categories lost less than the industry, between 0.8% and 2.8%, while compact cars were flat compared to March, and luxury and midsize cars lost slightly more month over month at 3.3% each.

The Mannheim index peaked in early 2022 after a rapid runup during 2021 when new vehicles were hard to find on dealer lots forcing many buyers into the used vehicle market. At the same time, prices of all kinds of new vehicles increased on the heels of product shortages. The rapid increase, however, contributed to increase in inflation.

The rapid increase in the prices of both new and used vehicles also created a two-tier market based on based on income as buyers with annual family incomes of six figures continued to purchase new vehicles, while buyers with smaller markets migrated to the used market. Meanwhile, the average transaction prices for new vehicles continued to climb in April, according to J.D. Power.

The migration of buyers with more modest incomes into the used-vehicle market also increased as new vehicles became even more expensive as leasing and incentives shrunk dramatically.

In April, Manheim Market Report values also saw declines that accelerated as the month progressed. During the last four weeks, the Three-Year-Old Index declined an aggregate 0.6%. Manheim also estimates used-vehicle retail sales declined by 8% in April from March and saw the year-over-year comparison with 2022 deteriorate. Used retail sales are estimated to be down 8% year over year in April. The average retail listing price for a used vehicle has been trending higher.

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• Source: https://www.thedetroitbureau.com/2023/05/used-vehicle-prices-drop-in-april/