Rollercoaster Ride of Used-Car Values May Be Leveling OutRollercoaster Ride of Used-Car Values May Be Leveling Out

Dealers seeking affordable used vehicles for resale have good news and bad news in the latest Manheim Used Vehicle Value Index report. The report includes wholesale auction values for December, a review for full-year 2024 and a 2025 forecast for a small increase in wholesale values.

The good news is that wholesale auction values are down from recent peaks. The bad news is, Manheim data suggest the current decline in used values may be ending – finding a “floor” for the time being at a higher level than the pre-pandemic, historical norm.

The beginning of 2025 marks “the end of the used-vehicle price correction,” says Jonathan Smoke, chief economist for Cox Automotive, the parent company of Manheim.

The Rollercoaster Ride of Used Vehicle Values

For December 2024, the Manheim Used Vehicle Value Index was 204.8, down just 0.3 percent from November, and up just 0.4% vs. December 2023. That’s the second month in a row the index was higher than the same month a year ago, but just barely, Manheim says.

What’s happened to the Manheim Index in the meantime has been a rollercoaster. The index peaked in December 2021 and January 2022, tied at a record 257.7, driven by new-vehicle shortages and a resulting high demand and low supply of used vehicles, too.

With some ups and downs since then, the index declined to a recent “low” of 196.1 in June 2024. Movement since then has been higher, but only modestly, which suggests the “correction” in super-high values may be settling down. Back in 2019, before the pandemic, the index was in the low 150s.

The Manheim Index is a single measure designed to track 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.

For year-end 2025, Manheim forecasts a 1.4% increase for the index vs. December 2024. As of third-quarter 2024, Manheim’s previous 2025 year-end forecast was for a decrease of 0.4%.

When Too Much

Dealers aren’t panicking over the decline in auction values slowing down, Jeff Dyke, president of Sonic Automotive, Charlotte, NC, tells WardsAuto.

Sonic’s average used-car prices are dropping, and he expects further declines for several reasons, including the fact that dealers can source used vehicles directly from consumers.

“The average prices are dropping. They’ve already gone from the upper $30,000s to the lower $23,000s. I expect to reach the mid-$22,000s this calendar year,” he says, adding that should help reduce monthly payments for consumers.

But Dyke says the No. 1 reason used-vehicle prices should keep declining is that most automakers are falling back on the bad habit of overproducing vehicles to chase market share. “The new-car manufacturers are producing inventory like they were popping popcorn. In many cases – in most cases – they have lost control again, unfortunately,” he says.

Moving The Metal

According to Manheim, industry new-vehicle inventory at year-end 2024 was about 3.1 million units, up 22% vs. the prior year.

The increase in new inventory spells higher incentives on new vehicles, and higher incentives on new vehicles directly lowers auction values on “nearly-new” 1-to-3-year-old vehicles, says Jeremy Robb, Cox Automotive senior director, economic and industry insights.

“The price of the key 3-year-old vehicle has moved lower since its peak in 2022, and that has helped consumer affordability,” Robb says. Many 3-three-year-old vehicles are lease-end returns, which are often turned into profitable, certified pre-owned units with reconditioning and a factory warranty.
As WardsAuto reports, there are strategies dealers can use to raise leasing penetration and make the most of this market swing.

It's important to consider options to raise lease penetrations as lease maturities are falling, reflecting the fact that new lease volume fell sharply three years ago when manufacturers withdrew lease incentives. That shortage is preventing used-vehicle values for newer models from falling any faster, Robb says. Lease maturities are expected to start to recover, but not until after 2025, analysts say.

“With the lack of incoming supply from lease maturities, over the next year and a half, we may be at some sort of a floor in the price of 3-year-old units for the time being,” Robb says

That’s bad news for dealers, analysts say.