Used-vehicle prices are much higher than a year ago, following a short, sharp decline last spring due to the coronavirus and a rebound that more than made up for it.
In fact, analysts are on the lookout for signs of a correction if demand should fall or supplies increase substantially – but so far there’s no correction in sight, says Jonathan Smoke, chief economist for Cox Automotive, the parent company of the Manheim wholesale auction organization.
“There’s no evidence of a correction,” Smoke says in a Jan. 8 webinar announcing the latest Manheim Used Vehicle Index. “Supply remains tight, and demand remains strong.”
In fact, Smoke notes several times during the webinar that used-vehicle values have resumed more-normal seasonal patterns in some ways – such as a more-typical seasonal decline in values seen toward the end of last year – but have started from a higher-than-usual level after the strong rebound in values last spring.
The Manheim Index for December was 161.1, a gain of 14.2% from a year ago, and close to a record. The December index was down 0.59% from the previous month.
Based on data from nearly 7 million wholesale auction units annually, the Manheim Index comes up with a single number that reflects actual pricing that can be compared over time. The index is weighted to control for different market segments, mileage, mix and seasonal adjustments.
Smoke says Cox Automotive expects used-car wholesale auction volume to increase in 2021. Inventory should rebound as dealers take in more trades on new vehicles and as repossessions increase. A lot of repos were postponed in 2020 due to the pandemic.
For 2021, Cox expects new-vehicle sales of 15.7 million, up from about 14.6 million in 2020. On the wholesale auction side, Cox forecasts volume of 16.2 million in 2021, up from 15.3 million in 2020. Cox is not expecting any increase in off-rental volume or off-lease volume in 2021.
Smoke says he remains very concerned about both the pandemic and jobs, even though low interest rates and strong household balance sheets for new-vehicle consumers are expected to support higher sales.
“We aren’t fully recovered, and we can’t be, until the virus is fully controlled,” he says. “We’re in a better place than spring or summer, but we are not out of the woods.”