Dealers Can Expect More Affordable Used Car Availability

Dealers may soon find more affordable vehicles to acquire, according to the latest forecast from wholesale used-vehicle auction firm Manheim, a Cox Automotive company.

That’s good news for dealers who have struggled to rein in costs as incentives chew away at their new-car profits.

“We definitely see pressure from incentives and growing discounts in the used market,” Cox Automotive’s chief economist, Jonathan Smoke, says during a discussion of the recent report.

Smoke means “incentives and growing discounts” on new vehicles because new vehicle incentives tend to reduce used vehicle values by similar amounts.

For the market as a whole, Cox Automotive says in a separate report that the average new-vehicle incentive as a percent of suggested retail was about 7% in April, up from about 2% in April 2022. However, that’s down vs. more than 10% for the majority of 2019 and 2020.

Higher new-vehicle discounts cutting used-vehicle values applies to EVs, too, Smoke says. New EVs have been the subject of manufacturers’ price cuts — most notably Tesla, but others, including Ford, have followed suit.

“The electric vehicle segment, that’s where we’ve seen the highest depreciation” in used vehicles, Smoke says.

Cox Automotive reports that the Manheim Index for used EVs is down 16.6% so far this year, compared to minus-9.5% for used non-EVs.

At the end of the first half, the average used EV had a retail price of $34,857, down 44.7% from a recent peak of $63,069 in August 2022, and much closer to the average price of $32,016 for vehicles with internal-combustion engines, Cox Automotive says.

Besides cutting some sticker prices, that’s partly because OEMs have introduced a large number of more-affordable EVs.

For the market as a whole, including all body styles and powertrains, Manheim has reduced its forecast for the Manheim Index to minus-2.3% as of the end of 2024. At the end of the first quarter of 2024, Manheim expected the Manheim Index to be almost flat, down just 0.7%.

As of the end of June, Manheim reports the Manheim Index at 196.1. That’s down from 215.1 in June 2023. For the first half of 2024, the Manheim Index was down 8.9% vs. a year ago.

The Manheim 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.