Wholesale used-vehicle prices ticked up in December to cap off a year in which there were several consecutive monthly declines, according to one major indicator.
Cox Automotive said Monday its Manheim Used Vehicle Value 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 0.8 percent in December from November.
Still, wholesale prices were down 15 percent at the end of December compared with the year-earlier period. Those figures are adjusted for mix, mileage and seasonality. On a nonadjusted basis, the Manheim index declined 1.9 percent in December from its November level, with prices down 13 percent year over year.
"While that [15 percent] decline was the largest in the series' history, compare that drop to the overall 88 percent increase in the 21 months from April 2020 to January 2022," said Chris Frey, senior manager of economic and industry insights at Cox Automotive, during a Monday quarterly insights call.
Frey also noted Cox Automotive has adjusted the starting point for the Manheim index, as of the December update. It now begins with January 1997 instead of January 1995 — a measure to "help improve accuracy and consistency across the full history of the data," Frey said.
All monthly and yearly percentage changes are identical — only the index starting point was adjusted, Frey said.
The Manheim index stands to decrease by 6 percent by June if a disappointing tax refund season and peaking interest rates cause higher than normal depreciation to occur in the spring auto sales period, Cox Automotive Chief Economist Jonathan Smoke said.
Used-car prices have been so elevated that now even some vehicles priced at the lower end are more out of reach for consumers because interest rates are making monthly payments much higher, Frey said.
"Once that tourniquet [of interest rate increases] starts getting twisted, that really stops a lot of people or delays their purchase decisions, new or used," Frey said. "But in this case, on the used side, it's probably a little bit more."
Used-vehicle demand could stabilize and improve midyear as lower wholesale prices trickle through and create more affordable buying opportunities, according to Smoke. If interest rates stop increasing, that could cause consumers' monthly payments to smooth out, too, he said.
There also is a likelihood that the market remains supply-constrained, putting "a floor under values" just as used-car prices return to some normalcy, Smoke said. He predicted wholesale prices could ultimately end 2023 down 4.3 percent from their December 2022 level.