Yes, Used Car Acquisitions Are Up – A Bit

Dealers are likely to continue self-sourcing as many used vehicles as possible through trades, lease returns or purchases from consumers off the street. That’s because wholesale used-vehicle auction prices are stronger than expected, Cox Automotive says in its latest Manheim Used Vehicle Value Index report.

“Used supply remains tight for a few more years,” says Jeremy Robb, Cox Automotive senior director of economic and industry insights.

Manheim reports that among the common sources of used-car inventory, repossessions and lease returns are up – from very low levels – but trade-in volume reflects overall new-vehicle volume, which is slow.

The relative lack of used-vehicle inventory prevents used-vehicle values from falling as far or as fast, especially for “nearly new” used vehicles 3 years old or younger, Cox Automotive says.

The current shortage of low-mileage used cars reflects the drop in new-vehicle production three years ago due to the pandemic and supply-chain problems.

Cox Automotive reports the Manheim Index for September was 203. That’s down 5.3% vs. September 2023 but down just 0.5% vs. August 2024.

September 2024 marked the 25^th straight month the index fell below the same month a year earlier. However, the pace of decline is slowing. In seven of the past 12 months, the index was down less than 1% from month to consecutive month, like the change from August 2024 to September 2024.

The Manheim Index is a single metric 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.

Auction prices were strong enough in the third quarter that Cox Automotive has raised its year-end 2024 forecast for the Manheim Index to a decline of just 0.6%. At the end of the second quarter, the year-end 2024 forecast was for a decline of 2.6%.

Robb says the latest correction to the Manheim Index year-end forecast takes Cox Automotive back to where it began the year. At the end of the first quarter, the Manheim Index forecast was for a decline of 0.7% for December 2024 vs. December 2023.

In an August conference call, Penske Automotive Group reports its franchised dealerships self-source 85% of their used-car volume, as opposed to wholesale auctions.

“Most of our sourcing comes from trades and lease returns. But we’re also doing a little bit in terms of buying your car directly from the street,” says Tony Pordon, executive vice president. He says Penske Automotive Group also retails a large volume of former loaner cars.

 “Dealers are acquiring a lot of vehicles direct from the consumer,” Robb says.