Wholesale used vehicles reach lowest cost of year

Wholesale used vehicle prices reached their lowest level of the year in May, as sales fell amid high interest rates and inflated retail prices.

Cox Automotive reported yesterday a 2.7% decline from April to May in its Manheim Used Vehicle Value Index to 224.5. It marks the second consecutive monthly decline and

the index’s lowest level since 219.3 in December. The index, which tracks vehicles sold at its U.S. wholesale dealership auctions, remains elevated from historical levels but is expected to continue to decline this year amid improving new vehicle inventory levels and high interest rates that appear to be scaring off consumers.

“Taking a longer view, May’s year-over-year decline accelerated from April and March; however, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year,” Chris Frey, Cox senior manager of economic and industry insights, said in a release. “Two consecutive reads in either measure do not a trend make, as used retail inventory is still below last year, and that tends to keep buyers at the auction, supporting prices.”

Used retail sales are estimated to have been down 11% year over year in May, Cox reports. The notable decline comes as many Americans, especially those with lower credit ratings, are being priced out of the market and repairing their vehicles instead of replacing them.

The declines in sales and wholesale prices signal the used vehicle market is weakening, according to Cox. That’s not good for U.S. auto dealers but a win for the Federal Reserve’s battle to taper inflation by ratcheting up interest rates.

• The major market segments saw seasonally adjusted prices that were again lower year over year in May. Compared to May 2022, pickups, compact cars, and vans lost less than the industry, at 4.6%, 7.2%, and 7.5%, respectively. The luxury segment lost 10.8%, SUVs were down 8%, and midsize cars were off by 7.9%. Compared to last month, vans actually increased by 0.2%, while compact and midsize cars declined by 2.4% each. SUVs were flat vs. April, with luxury and pickups down 3% and 4.3%, respectively.

• May’s total new-light-vehicle sales were up 22.9% year over year, with one more selling day than May 2022. By volume, May new-vehicle sales were flat month over month. The May sales pace, or seasonally adjusted annual rate (SAAR), came in at 15 million, an increase of 19.6% from last year’s 12.6 million but down 6.5% from April’s revised 16.1 million pace.

• Fleet share was estimated to be 16.8%, a gain of 1.8% over last year’s share and a decrease from April’s 17.5% share. Cox reports the average listed price of a used vehicle was $26,969 in April, the most recent data.