Tax Season Should Bring Peak Wholesale Used-Car Values

Tax refund season has begun, which usually results in the annual peak for wholesale used-vehicle values.

Anticipating that demand, dealer business picked up in late February, according to the latest Manheim Used Vehicle Value Index. Manheim says dealers should be aware tax refund/spring selling season for used cars is getting under way.

Averaged out over the entire month of February, wholesale used-vehicle values were virtually flat for the third consecutive month, comparing December 2023, January 2024 and February. Manheim says price stability is welcome, but values were still lower than a year ago.

The Manheim Index for February, which was published March 7, was 203.8. For December and January, it was 204. However, the February Manheim Index was down 13.1% vs. a year ago. The Manheim Index has been below the year-ago month for 18 consecutive months, according to Manheim data.

The seasonally adjusted averageused car price was $18,645 in February 2024. That was down 13.1% from $21,452 in February 2023, Manheim says.

Analysts say used-vehicle values are down in part because of the recovery in new-vehicle availability, along with an increase in new-vehicle factory incentives. That’s drawing well-qualified buyers back to new vehicles.

During the height of the pandemic, well-qualified buyers bid up used-vehicle values to find the vehicles they wanted and to avoid record-high transaction prices for new vehicles. But today, new-vehicle transaction prices are trending slightly down.

Meanwhile, Jeremy Robb, senior director of economic and industry insights for Manheim parent Cox Automotive, says the last week in February produced “some of the strongest weekly gains in wholesale prices for many years.”

Tax refund season should help. The IRS says the tax filing season officially started this year on Jan. 23, so it’s still early days.

As of Feb. 23, the IRS reports the number of returns processed so far was about 44 million, down 3.6% vs. a year ago. The average amount refunded is $3,213, up 4.3% vs. a year ago. The number of refunds so far was about 28.9 million, down 17.6% vs. a year ago.

The Manheim Index is designed to be a single measure that tracks used-vehicle wholesale price changes, seasonally adjusted and weighted for a changing mix of product segments and mileage. The index is calculated relative to a starting point, where January 1997 equals 100.