Wholesale used car prices jump on stronger demand

Wholesale used car prices rose slightly in the first half of Nov. from last month, contradicting the usual seasonal trends for fall.

Driving the news: Typically, wholesale values see a marginal decrease at this time of year, falling an average of 0.4 basis points. But with retail sales on the rise for used vehicles, auction prices are starting to move upward as well, according to Cox Automotive.

• The first two weeks of Nov. saw wholesale values gain 1.6% compared to Oct. Prices are higher than last year by 0.5%.

Behind the scenes: Increased demand is leading to an atypical rally in used vehicle prices for this time of year.

• The daily sales conversion rate for the first half of this month was 59.9%, up three points from Oct.

• Compared to 2019 values, the current rate is about nine points higher, reflecting a sharp increase in sales.

Zooming in: Different segments saw different wholesale price gains compared to Oct., with electric vehicles performing the weakest compared to the rest of the industry.

• While EV values still rose, they only saw an improvement of 0.6%, notably lower than the industry-wide increase of 1.6%.

• SUVs saw the biggest gain in auction prices, rising 1.7%, followed by midsize and luxury vehicles at 1.6%, compacts by 1.2% and pickups by 0.9%.

• Compared to last year, SUV prices were flat and midsize prices rose 1%. Other segments saw marginal declines over Nov. 2023 numbers.

Looking ahead: Wholesale supply has inched downward compared to previous years, reflecting the increase in demand among consumers and dealers.

• As of last week, days’ supply levels are down three days compared to historical norms, dropping one day from Oct. to 27 days.

• Consumer sentiment is also on the rise, thanks to perceived improvements in buying conditions, prices and interest rates. The sentiment index, maintained by the University of Michigan, is up 19% year-over-year.

Bottom line: Wholesale prices are reflecting an unseasonal rally in sales and demand. Should these trends hold steady throughout Nov., dealers should a sizeable improvement in used car performance compared to recent years.

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