To avoid rising used-vehicle auction prices, dealer groups double down to buy more trade-ins, older used cars and off-the-street purchases for resale, as tariffs on new vehicles drive up consumer demand for used vehicles.
The latest symptom: the Manheim Used Vehicle Value Index increases a stiff 4.9% in April vs. a year ago, to an index of 208.2, the highest since October 2023, auction firm Manheim reports on May 7. That corresponds to a seasonally adjusted average price of $19,041 in April, up 4.9% vs. $18,151 a year ago, according to Manheim.
“We expected to see strong price appreciation in response to the tariffs, and that’s exactly what came,” says Jeremy Robb, senior director of economic and industry insights at Cox Automotive in Atlanta. Manheim is a Cox Automotive company.
Heading Higher
The Manheim Index had been flattening out this year following 26 straight months of monthly declines vs. the year-ago month, from September 2022 to October 2024. The prior streak of declining prices in turn represents a correction from record-high used-vehicle auction prices brought on earlier by the COVID-19 epidemic and supply-chain shortages.
Dealers had been cautiously celebrating the gradual decline in used-vehicle values, even though values remain much higher than before the pandemic. At least, used-vehicle values were moving in the right direction from an affordability standpoint. That occurred as the new vehicle supply improved. New-vehicle leasing has also begun to recover, which generates an improved supply of desirable 3-year-old used vehicles.
Meanwhile, publicly traded, new-vehicle dealer chains report separately that they are “self-sourcing” as many used vehicles for resale as possible, as an alternative to buying cars at wholesale auctions.
Growing Their Own
Jeff Dyke, president of Sonic Automotive, Charlotte, NC, says margins are increasing for the group’s EchoPark used-only channel, in an earnings conference call.
“EchoPark’s margins are growing. We’re buying a larger percentage of our cars off the street. We’ve moved from 20% to 25%, up to 30%, to as high as 35% of the cars now on a weekly basis coming from street purchases,” says Dyke. “That’s making a big difference in our front margins, and that really helped out in March of the first quarter, and it’s carrying over into April, and that’s a change for us. So front-end margins are improving there, and we expect that to continue.”
In its franchised-dealership segment, Sonic also has a goal of selling an average of 100 used vehicles per month, an increase in used-vehicle volume of about 25%.
Mike Manley, CEO of AutoNation, Fort Lauderdale, FL, says his group also aims to increase used-vehicle volume. “For example, we have made a concerted effort to increase our used-car inventory, and are now carrying the highest level of vehicles since December 2023,” he says.
Making It Up on Volume
AutoNation reports a 36-day supply of used vehicles at the end of the first quarter, up from 31 days a year ago.
“We are executing much better on vehicle acquisition, reconditioning, inventory velocity and pricing,” says Tom Slozic, AutoNation chief financial officer. “We continue to be competitive in securing trade-ins from new-vehicle buyers and to source more than 90% of our vehicles internally, including through our ‘We’ll Buy Your Car’ program,” he says.
The Manheim Index is a single measure designed to track 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.
