The wholesale prices used car dealers pay for the cars they later sell decreased by 2.7% in May.
According to the Manheim Used Vehicle Value Index, wholesale auction prices are now about 7.6% lower than they were at this time last year after adjusting for normal seasonal variations. The index is a product of Kelley Blue Book parent company Cox Automotive.
The price of the average used car rose in April, reaching $26,799. But they may drop soon. When wholesale prices fall, retail prices usually follow within six to eight weeks.
Our analysts tell us the used car market may not recover to anything like its pre-pandemic normal for years. Manufacturers built about 8.1 million fewer cars than expected during the COVID-19 pandemic. That means fewer cars reaching the used car market, which will keep prices inflated.
Used car shoppers also face challenges trying to finance a purchase. Interest rates have been rising, and many lenders charge higher rates for used car loans than for new car loans, even under the best economic conditions.
We expect some volatility in prices over the next several months. Chris Frey, senior manager of economic and industry insights for Cox Automotive, tells us, “May’s year-over-year decline accelerated from April and March; however, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year.” But, he says, “ used retail inventory is still below last year,” which can work against those declines.
The Conference Board Consumer Confidence Index declined by 1.4% in May, as views of the present situation and future expectations both declined. Consumer confidence was down 0.9% year over year. Plans to purchase a vehicle in the next six months increased and are up year over year.
