Manheim Expects Wholesale Used-Vehicle Values to Drop

For all of 2023, Cox Automotive expects wholesale used-vehicle values to drop just a couple of percentage points vs. a year ago – a smaller drop than Cox predicted at the beginning of the year – based on continued demand and relatively short supply.

“Supply remains tight,” Chris Frey, Cox Automotive’s senior manager of economic and industry insights, says during the recent Manheim Used Vehicle Value Index presentation. “That will be key to what we see next year.”

High used-vehicle prices cut both ways for dealers, depending on whether they’re buying or selling. High auction prices motivate dealers to self-source as many used vehicles as possible, from trade-ins, dealer trades or buying vehicles off the street, according to Manheim, a wholesale auction firm that is part of Cox Automotive.

Dealers need to sort used-vehicle inventory into “turners” or “earners,” says Derek Hansen, who leads Cox’s vAuto subsidiary as vice president of operations for Cox Automotive Inventory Management Solutions.

Less desirable “turners” must be sold quickly, possibly for less profit. Sought-after “earners” can be held onto to pursue a more significant profit, Hansen says.

Meanwhile, Frey says there was an overall 26 days’ supply of wholesale used-vehicle inventory in September, down 10% vs. a year ago.

The Manheim Index was 214.3 in September. That’s an increase of 1% vs. August but down 3.9% vs. a year ago. As of December 2023, Cox now forecasts the Manheim Index will be down 2.2%.

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.

The forecast has been a moving target. In January, the forecast was for minus-4.3% as of  December 2023. At the end of the first quarter, based on rising wholesale prices at the time, the forecast was revised to an increase of 1.6% at year-end. That was revised again at midyear to minus-1.1%.

Jonathan Smoke, chief economist for Cox Automotive, recently referred to rising prices in the first quarter as a “head fake.” He also referred to the midyear revision to the forecast as “the beginning of the return to normal” in terms of used-car values.

To be sure, there are still threats to the forecast, which Smoke calls “new uncertainty.”

The No.1 uncertainty is how long the UAW strikes against the Detroit Three manufacturers last, he says. Smoke says he doesn’t expect a “material” impact on auto sales unless the strikes last beyond Thanksgiving.

He also cites the latest political “chaos in Washington” as a possible threat to consumer confidence and the economy.

But so far, Smoke says, there’s “no evidence in the data” for a general pullback in consumer spending.