Wholesale vehicle demand heats up so far in July

In the first 15 days of July, wholesale used vehicle prices reversed course from last month and increased 1.8% 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 5.7% from the full month of July in 2023, indicating that depreciation is slowing considerably, according to Cox Automotive.

• Over the last two weeks, prices in the Three-Year-Old Index rose by 0.3%, a stark contrast to the typical decline of 0.5% around this time of year.

• The average daily sales conversion rate was 58.8, which was 1.1.% more than the full month of June, and a 2.4% jump from May. Yet, The conversion rate is still below the July 2019 average of 60.1%.

• Manheim Market Report (MMR) Retention, which measures how closely average auction transaction prices align with market value, averaged 99.3%.

What it means: A pullback on factory discounts last month and stable (but elevated) new car prices are pushing more car buyers to the used car market. Demand for these vehicles was high due to the July 4th holiday, and wholesale days’ supply is typical for this time of year at 28 days. But perhaps hot for long. Declining lease maturities could hamper supply and drive prices up further. 

By segment: Compact car sales rose by 2.7% compared to June, and midsize cars saw a 3.1% increase, outperforming the overall index. SUVs and pickups both increased by 1.8%, while the luxury segment remained flat. Non-EV sales were up 2.4% in the first half of July, with EVs seeing a 1.5% rise.

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

Bottom line: The wholesale market appears to be moderating slightly but used car prices will likely still be elevated against pre-pandemic levels for some time.

Analysts estimate that millions of vehicles that were supposed to get built during the pandemic didn’t due to supply chain shortages. Eventually, those cars would’ve made it to the used market, but instead, high-quality used vehicles are still in short supply while demand is high.

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