Used-Car Wholesale Prices Have Given Up 53% of their Crazy Pandemic Price Spike: Historic Plunge Continued in December
Used vehicle prices at auctions fell another 0.5% in December from November, seasonally adjusted; and by 2.0%, not seasonally adjusted, according to the Manheim Used Vehicle Value Index today. Manheim is the largest auto auction house in the US and a unit of Cox Automotive. Its auction venues sell about 5 million vehicles a year. The index is adjusted for changes in mix and mileage.
The index price, at $18,110, has dropped by $4,792, or by 20.9%, from the peak in May 2022. During the incomprehensibly crazy run-up of prices from February 2020 through May 2022, the index had soared by $8,842, or by 63%, to $22,902.
As of December, $4,792 or 54% of the $8,842 price spike has now vanished – a historic plunge, after a historically insane price spike.
Auction prices stall or drop when dealers who go there to replenish their inventory buy less, are more skittish about bidding up prices, and would rather walk away empty-handed than overpaying, knowing that they’re facing pricing resistance among their customers.
This all fell apart during the pandemic when dealers suddenly dealt with consumers who would pay anything for a used vehicle, instead of trying to drive a bargain. And dealers held their noses and cringed and bid up prices at auctions, knowing that they could still make huge amounts of money at those prices because consumers were just willing to pay whatever. And some of them even put their observations of this craziness on YouTube.
Most people could have just continued to drive what they already had for another year or two, causing demand to collapse enough to where dealers would have had the choice of either eating their inventory instead of their daily bread or cutting prices. But no, not in 2020 and 2021, when money was free and fell like manna from heaven, price didn’t matter, and dealers raked it in.
People who bought back in 2021 and 2022, are now driving vehicles whose values have plunged historically, in addition to the normal depreciation.
The question on everyone’s mind is this: How much more will used vehicle prices drop before the price increases start all over again?….
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