The price of used vehicles has dropped for the fifth consecutive month once October’s sales results are figured in, according to Manheim, which assembles the data for its Index from its used-vehicle auctions around the country.
Manheim reported wholesale used-vehicle prices — on a mix, mileage, and seasonally adjusted basis — dropped 2.2% in October from September. Used vehicle prices are one of the components of the U.S. Department of Labor’s monthly inflation report, which earlier this month indicated the high rate of inflation dogging the U.S. economy is slowing a bit.
Prices for both new and used vehicles remains high by historical standards.
Manheim Index points down
The Manheim Used Vehicle Value Index declined to 200 and is now down 10.6% from a year ago. The non-adjusted price change in October was a decline of 2.1% compared to September, moving the unadjusted average price down 9.3% year over year.
All eight major market segments saw seasonally adjusted prices that were lower year over year in October.
Compact cars had the smallest decline, at 6.1%, followed by vans and pickups, at 6.4% and 8.4%, respectively, Manheim reported. The data suggested consumers are looking for less expensive vehicles as an antidote to the sharply rising prices of both new and used vehicles, which have occurred over previous two years.
Compared to September, six of eight major segments’ performances were down. Sports cars lost the most at 3.2%, followed by luxury cars at 2.7%. Four other segments lost between 2.4% and 0.8%, including pickup tracks. Full-size cars were up 4.5%, and vans were flat at zero percent.
Manheim also reported the average daily sales conversion rate increased to 51.8%, which was above normal for this time of year. The higher conversion rate indicated the month saw sellers with more bargaining power in October than what is typically seen for this time of year.
In October, Manheim Market Report, or MMR, values saw smaller-than-normal declines that were relatively stable during the month, culminating in a 2.2% total decline in the Three-Year-Old Index over the last four weeks. In the month of October, daily MMR Retention, which is the average difference in price relative to current MMR, averaged 98.2%, meaning market prices were below MMR values.
Used vehicles still tough to find
Jonathan Smoke, the chief economist for Cox Automotive, owner of the Manheim Auctions and Index, noted, “Even though used prices have come down some this year, it is still difficult to find a used vehicle without substantial mileage or maintenance concerns that would produce an affordable payment without other expense challenges.
“In today’s market, subprime buyers are mainly limited to vehicles that are 6-9 years old and with at least 75,000 to more than 120,000 miles,” he added.
Smoke noted the natural loss of vehicles that occurs over time. “Go back more than eight years, and you will find that fewer vehicles were manufactured during and coming out of the Great Recession,” he said.
As the pandemic and supply chain issues limited new-vehicle production, primarily the most profitable vehicles and the most expensive configurations have been produced. Now throw in restrictive rates for the foreseeable future and the industry must contend with a buying pool that will only reinforce a focus on wealthy consumers, Smoke said.
“The used-vehicle market offers no affordable refuge. Since yesterday’s new market supplies the used market, affordable alternatives will also be limited. Like the new market, with the rate moves this year, the used-vehicle market is starting to see similar shifts in buyers, with higher-income consumers gaining share and subprime increasingly being priced out,” he said.