Wholesale used-vehicle prices rise again in February, bucking 2022 trends

Wholesale used-vehicle prices rose in February, fueled by stronger demand and tightened supply, according to two major indicators. One of those, the Manheim Used Vehicle Value Index, recorded a third-straight month of increases.

Cox Automotive said Tuesday that its Manheim index — a measurement of wholesale used-vehicle prices calculated by tracking vehicles sold at Manheim's U.S. auctions and applying statistical analysis to those figures — rose 4.3 percent in February from January. That is the index's largest increase for any February since a 4.4 percent rise in 2009, said Cox, which adjusts its figures for mix, mileage and seasonality.

Black Book's Used Vehicle Retention Index — another indicator of wholesale prices, weighted based on registration volume and adjusted for seasonality, vehicle age, mileage and condition — rose 1.9 percent in February from January after seven months of sequential declines.

Still, wholesale prices were down compared with a year earlier, when used-vehicle demand was stronger overall. The Manheim index was 7 percent lower last month compared with the same month in 2022, according to Cox. The company also reported nonadjusted figures for the Manheim index — up 3.7 percent in February from January and down 5.6 percent year over year.

In 2022, wholesale prices went through periods of consecutive declines.

The Manheim index rose month over month only in May and December. At the beginning of 2023, Cox Automotive predicted that the depreciation trends would continue in the first half of this year. But that has not turned out to be the case, Cox Automotive Chief Economist Jonathan Smoke said.

"We've instead seen increasing wholesale prices, and I believe it's principally a reflection of how tight supply is in the used-retail market," Smoke told Automotive News.

Average nonadjusted wholesale prices for 3-year-old vehicles, the largest model year cohort at Manheim's auctions, rose 2.4 percent in February from January, Cox reported.

Positive sales momentum, which was seen in January, leads dealerships to have to restock used vehicles, Smoke said. And when they're restocking, they are more aggressive in the wholesale market.

"The wholesale market is super tight, and that's why we saw stronger sales conversion that drove prices higher," he added.

Cox Automotive estimated that the retail used-vehicle supply in the U.S. was at 41 days at the end of February, down from 48 days at the end of January and 54 days at the end of February 2022. Wholesale used-vehicle supply ended February at 24 days, down from 26 days at the end of January and 29 days at the end of February 2022.

Retail outlook

Retail sales of used vehicles declined 5 percent in February from January and 9 percent year over year, according to initial estimates from Cox Automotive. It compiles those estimates by tracking a set of dealerships using Cox's Dealertrack dealership management system software and using those stores as a proxy for the U.S. industry.

Smoke indicated that the market could be up and down over the next several months.

Used-vehicle retail prices, which have been declining, are now likely to follow the wholesale price increases over the next couple of weeks, he said. But if higher retail prices again converge with higher interest rates and affordability concerns, sales momentum for used vehicles could once again slow in the subsequent months. And that could put pressure on wholesale prices to decrease later in the spring, Smoke said.

However, with the stronger-than-expected wholesale prices at the start of the year, Cox Automotive now anticipates the Manheim index will end 2023 up slightly rather than down slightly, as its researchers had predicted at the end of last year.

Black Book index

The Black Book index rose to 170.9 in February, up 3.1 points from January, Black Book said Monday. While 1.9 percent higher than in January, that figure is 11 percent below where it was at the same time in 2022. And it's 49 percent higher than in March 2020, when the coronavirus pandemic began.

Wholesale prices for the 2- to 6-year-old vehicle segments that make up Black Book's index "started to increase at the end of January and began picking up steam by the end of February," Black Book Chief Data Science Officer Alex Yurchenko said in a news release.

It appears there is "an anticipation" of increased used-vehicle demand at retail in the next several months, Yurchenko said.

"Activity at auctions increased last month as dealers were preparing for the Spring market — we saw measurable improvements in the conversion rate and volume going through the auctions," Yurchenko said in the release.

Black Book reported price increases across all mainstream vehicle segments. Of those, compact cars and compact crossovers exhibited the highest appreciation, Yurchenko said.

"Now, retail listing prices are still on a decline, but we expect a reversal in the near future as demand for used vehicles strengthens in the short-term," Yurchenko said in the release.