Used-Vehicle Values Hit Pothole

Used-car wholesale values surged in this year’s first quarter but dropped noticeably in the second.

“The wholesale market story for the first half of 2023 can be summed up in one word: ‘volatile,’” says Cox Automotive Chief Economist Jonathan Smoke.

The up-and-down action wasn’t a complete shock, considering the high interest rates, slim used-car inventories and other factors. Nor does it trigger a code-red alert.

“Larger upswings during the first quarter and a downward trajectory that began in the second half of March have brought us to roughly where we expected to be at this point in the year,” Smoke says.

The Manheim Used Vehicle Value Index (MUVVI) declined to 215.1 in June, ending 2023’s first half down 10.3% from a year ago. Wholesale used-vehicle prices decreased 4.2% in June.

“The 4.2% drop is among the largest declines in MUVVI history and the largest decline since the start of the pandemic in April 2020 when the index plunged 11.4%,” says Chris Frey, Cox Automotive’s senior manager-economic and industry insights.

The good news? 

“The worst of this is likely behind us,” Smoke says during the recent online Manheim Used-Vehicle Index report.  “We do not expect to see the declines we’ve seen this spring.”

Used retail sales held steady in June and are showing signs of strengthening.

Pre-owned vehicle inventory levels are generally balanced between supply and demand. (That wasn’t the case in 2022 as demand for both new and used vehicles outpaced supply.)

Consumer demand remains strong but has abated somewhat this year. Dealers’ new-car inventory levels are normalizing as automakers’ output – which a chronic parts shortage had hobbled – increases. June’s new-vehicle sales were up 19.9% year over year.

Consumer sentiment rose 4.4% in June. And job growth continues although it has decelerated somewhat.

Cox Automotive predicts 2023 sales of 15 million new vehicles and 35.7 million used units. In previous blockbuster years, new-vehicle sales had topped 17 million and used-vehicle sales exceeded 40 million.