In May 2023, wholesale used vehicle prices reached their lowest level for the year, reflecting a decline in sales amid high interest rates and inflated retail prices. Cox Automotive, a leading provider of automotive services, reported a 2.7% drop from April to May in its Manheim Used Vehicle Value Index, bringing it to 224.5. This marks the second consecutive monthly decline and the lowest level since December’s 219.3.

The index, which tracks vehicles sold at U.S. wholesale dealership auctions, remains higher than historical levels. However, experts anticipate a further decline in the coming months due to improved new vehicle inventory and the impact of high interest rates, which seem to be discouraging consumers from making purchases.

Chris Frey, Cox’s Senior Manager of Economic and Industry Insights, noted that May’s year-over-year decline was steeper than April and March. However, he expects the rate of decline to ease in the following months as auction prices from May through November last year were relatively lower.

Cox reports an estimated 11% year-over-year decrease in used retail sales for May. This significant decline coincides with a trend where many Americans, particularly those with lower credit ratings, are finding themselves priced out of the market and opting to repair their vehicles instead of buying new ones.

The sales and wholesale price declines are indicative of a weakening used vehicle market, according to Cox. While this may not be favorable for U.S. auto dealers, it aligns with the Federal Reserve’s efforts to address inflation by raising interest rates.

Demand for used EVs skyrockets

Since early last year, used vehicle prices have increasingly served as a barometer for inflation. The Biden administration had previously attributed rising inflation rates to the market. Used vehicle prices have remained elevated since the early days of the COVID-19 pandemic, driven by a combination of global health crisis-related disruptions in new vehicle production and supply chain issues. The resulting low supply of new vehicles and high demand led to record-high prices, which also impacted the used vehicle market.

Continued declines in wholesale prices could potentially translate to lower prices for consumers in the used vehicle market, as retail prices traditionally follow changes in wholesale prices. However, Cox’s reports indicate that retail listing prices have not followed this pattern. Over the last four weeks, the average retail listing price for used vehicles actually increased by 0.8%.

According to Cox’s data from April, the most recent available, the average listed price for a used vehicle was $26,969. As the market evolves, consumers will be watching closely to see if declining wholesale prices eventually result in more affordable options on the retail side.

Used vehicle prices decline as automakers increase production of new cars and trucks