Used vehicles are seen on the Roger Beasley South dealership lot in Austin, Texas June 7, 2023.
Brandon Bell | Getty Images
DETROIT — Wholesale prices for used vehicles saw their biggest fall last month because the start of the Covid-19 pandemic as prices are expected to stabilize in the second half of this yr.
Cox Automotive he announced on Monday a 4.2% drop from May to June in the Manheim Used Vehicle Value Index to 215.1. In line with Cox, this marks the third consecutive monthly decline and one in all the most important monthly declines in the index’s history.
“Auction buyers seem like taking an early summer break, and while used retail inventory has been improving over the past few weeks, we expect less volatility in wholesale price developments through the top of the yr,” Chris Frey, senior manager and industry insights, he said in a communiqué.
The index, which tracks vehicles sold at wholesale auctions in the US, stays elevated from historical levels but is down 10.3% from June 2022.
The drop could help drive used vehicle prices down for consumers in the approaching months as retail prices traditionally follow wholesale price movements.
The retail used vehicle market stays strong but is estimated to be down 6% last month in comparison with June 2022, in response to Cox. The decline was driven by the increasing availability of recent vehicles and high rates of interest, Cox senior economist Jonathan Smoke said in a conference call on Monday.
“We are now at a turning point where the market is returning to more equilibrium, and this balanced market is prone to bring small but predictable changes in sales and fewer news of enormous price movements,” Smoke said.
Prices for used vehicles have risen because the early days of the Covid-19 pandemic as the worldwide health crisis coupled with supply chain issues has resulted in occasional shutdowns in the production of recent vehicles. This has led to low supply of recent vehicles and record high prices amid buoyant demand. The associated fee and scarcity of inventory drove consumers to the used vehicle market, driving up those prices as well.
Cox expects wholesale used vehicle prices to fall by around 1.1% at the top of this yr in comparison with December 2022. That is lower than the corporate’s initial forecast of a 4.3% decline as prices and demand have been more resilient than expected at the start of the yr.
“The buyer hangs there,” Smoke said. “We do not expect the remaining of the yr to see the declines we saw in the spring.”
Cox expects the wholesale used vehicle market to experience a “slow and gradual recovery” of costs to pre-pandemic levels by 2028.