The price of the average used car is coming down slowly, in part because dealers are paying less for used cars at auction.
The Manheim Used Vehicle Value Index measures the wholesale prices that dealers pay for the used cars they later sell. It’s a product of Kelley Blue Book’s parent company, Cox Automotive, which also owns Manheim, the world’s largest wholesale auto auction company.
The index fell 0.5% in December from November, finishing the year 7% lower than 2022. Compared to their peak in 2021, used vehicle values are down nearly 21%. Retail used-vehicle listing prices are down 4.3% on a year-over-year basis.
Normalcy Is (Probably) Coming
Declining used car prices fit the overall theme emerging for 2024, says Cox Automotive Chief Economist Jonathan Smoke. “For 2024, the key word for the wholesale market is ‘normalcy.’ Manheim expects constrained growth with a volume increase of less than 1%. As for price patterns, we anticipate a normalization trend, and we expect that 2024 will be the first year in five where we will experience fairly normal depreciation in the wholesale market.”
Waves that rock the new car market hit the used car market years later. Used car prices may not drop drastically for years because automakers built about 8 million fewer cars during the COVID-19 pandemic than they otherwise would have. That will constrain the supply of used cars for years to come.
Values Still Inflated
“As we move into 2024, it’s important to note that used-vehicle values increased faster than the overall rate of inflation,” said Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive. “So, even though prices have come down over the last two years, they are still about 33% higher than at the end of 2019. More normal declines will likely be seen in the coming years,” he says, but the average value of a used car “will continue to be higher than in the past.”
Prices are inching down as supply inches up. Dealers ended December with a 56-day supply of used cars to sell on average — up two from November and not far from the traditional target of 60 days.
