Wholesale used car prices jump in July as supply tightens

For the full month of July, wholesale used vehicle prices increased month-over-month from June by 2.8% when adjusted for seasonality.

By the numbers: The Manheim Used Vehicle Index, which tracks prices that car dealerships pay for used cars at auctions, was down 4.8% from July 2023, indicating that depreciation continues to decelerate quickly, according to Cox Automotive.

• Prices in the Three-Year-Old Index rose by 1.1%, higher than what is considered normal for this time of year. The same four calendar weeks decreased on average by 0.6% between 2014 and 2019.

• The average daily sales conversion rate was 60.1% on par with the July 2019 average of 60.1% and markedly higher than the last three years.

• Manheim Market Report (MMR) Retention, which measures how closely average auction transaction prices align with market value, averaged 98.6%.

Key quote: “In late June, wholesale value declines slowed, and that trend continued throughout July as we saw values appreciate over the course of the month,” said Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive. “The sales conversion rate has ben higher for each week in July, and that translated to higher prices overall at the wholesale level for the month.

What it means: A bump in new car inventory and steady, but high, sticker prices are pushing down costs for pre-owned vehicles. The average used car listing price slipped 0.5% over the past month, despite strong demand during the July 4 holiday. Current wholesale supply is also tightening due to shortage of lease returns further driving up prices.

By segment: Compact car prices rose by 3.3% compared to June, and midsize cars rose 3.8%, outperforming the overall index. SUVs increased by 2.7% and pickups by 2.8%, while the luxury segment remained somewhat flat, increasing only 1.6%.

• Yet, all major market segments saw seasonally adjusted prices that remained lower year over year.

Bottom line: We could be nearing the end of the sharp declines in wholesale values. With a constrained supply, prices can only go down so far. While retail used car prices will likely still be elevated against pre-pandemic levels for some time, they are coming down, creating a perfect storm for greater dealership margin compression.

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