Used-vehicle wholesale values are down almost 12% vs. a year ago, according to the just-released Manheim Used Vehicle Value Index for July. The July report marks the 11th month in a row the index fell below the year-ago month.
However, dealers looking for affordable used-vehicle inventory still may have to wait a while — more on that, later.
The July Manheim Index is 211.7, vs. 239.6 a year ago. That corresponds with a seasonally adjusted average price of $19,367 in July, down from $21,915 a year ago, Manheim says.
The index is designed to be a single measure that tracks used-vehicle wholesale price changes, weighted for a changing mix of product segments and mileage, and seasonally adjusted. The index is calculated relative to a starting point, where January 1997 equals 100.
For the rest of 2023, Manheim expects the decline in used-vehicle values to continue. However, the pace of decline has slowed, and Manheim analysts don’t expect the bottom to drop out of used values.
In recent, second-quarter earnings reports, some of the nation’s biggest dealership chains say they’re avoiding buying used vehicles at auction. Instead, they are concentrating on “self-sourcing,” buying used vehicles at trade-in, from lease returns, from their digital sales channels, or off the street.
“We continue to support our used-vehicle economics through effective self-sourcing, which was above 90% during the quarter,” says Joe Lower, chief financial officer, AutoNation, Fort Lauderdale, FL.
Tony Pordon, executive vice president of investor relations and corporate development for Penske Automotive Group, Bloomfield Hills, Mich., says in an earnings call, “We’ve put a concerted effort into buying more vehicles directly from consumers.
Meanwhile, Chris Frey, senior manager of Economic and Industry Insights for Manheim parent Cox Automotive, tells Wards that while used-vehicle wholesale values are down, they’re down from “crazy-high” levels.
From June 2020 to August 2022, the monthly Manheim Index increased 27 months in a row, year-over-year. That included 22 consecutive months of double-digit percent increases, Frey says.
“People were chasing vehicles on the used side, because there weren’t very many — if any — new vehicles,” because of the pandemic, and supply-chain issues, he says.
That has started to change this year. With better new-vehicle availability and a modest comeback in incentives, new-car shoppers today are sticking with new, instead of settling for used, and driving up used-car prices.
And due to high interest rates, affordability continues to be a problem for used-vehicle shoppers with subprime credit, Frey says. As noted, while wholesale prices are down, they’re still much higher than pre-pandemic.
“That’s a big part of it,” he says, referring to lower used-car values. “We’ve been talking about affordability for a long time.”
