(NewsNation) — The price of a wholesale used car continued to decline to a record 4.2% from May to June, the Manheim Used Vehicle Value Index reported Monday.
Compared to this time last year, wholesale used vehicle prices dropped by 10.3%.
This is among the largest declines in Manheim’s history, Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive, said. It also marks the largest decline since April 2020, when the index “plunged” 11.4%.
Cox Automotive Chief Economist Jonathan Smoke characterized the wholesale market for the first half of 2023 as “volatile” in a statement.
“Larger upswings during the first quarter and a downward trajectory that began in the second half of March have brought us to roughly where we expected to be at this point in the year,” Smoke said. “The good news is that the worst of this is likely behind us. Used retail sales held steady in June and are showing signs of strengthening – inventory levels are generally balanced between supply and demand.”
Does this mean people looking for a used car will pay less? It depends.
A drop in wholesale prices for used cars is typically followed by a decline in retail prices within six to eight weeks, according to Kelley Blue Book, although the lingering effects of the COVID-19 pandemic makes this relationship less predictable this year.
Kelley Blue Book, a valuation and automotive research company, writes that automakers built about 8.1 million fewer cars during the height of the pandemic, so not as many vehicles were able to enter the used car market. In addition, people driving leased cars chose to buy them, instead of returning the vehicles and starting a new lease, which Kelley Blue Book analysts say “blunted” the effect of falling wholesale prices.
However, while the retail used vehicle market remains strong, it is estimated to be off by 6% from last June, CNBC reported.
During a Monday conference call, Smoke said the decline is because of the availability of new vehicles combined with high interest rates.
“We are now at a turning point where the market returns to more balance and that balanced market is likely to deliver small but predictable changes in sales and less news about big changes in prices,” Smoke said, according to CNBC.