Wholesale used-vehicle prices decline again in May

Wholesale used-vehicle price erosion continued to an extent in May, according to two major indicators. One of those, the Manheim Used Vehicle Value Index, recorded a second-straight month of decline.

Cox Automotive said Wednesday 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 — fell 2.7 percent in May from April. Cox adjusts that figure for mix, mileage and seasonality.

Black Book's Used Vehicle Retention Index — calculated using Black Book's published Wholesale Average value on 2- to 6-year-old used vehicles and weighted based on registration volume and adjusted for seasonality, vehicle age, mileage and condition — fell slightly, by 0.1 percent, in May from April.

The Manheim index was 7.6 percent lower last month compared with the same month in 2022, according to Cox. The company also reported nonadjusted figures for the Manheim index — down 1.7 percent in May from April and down 8.2 percent year over year.

"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" if prices align more closely with lower prices seen at auctions from May through November last year, Cox Automotive's Chris Frey said in a news release.

Frey, senior manager of economic and industry insights, also said two data points do not make for a whole trend. Used-vehicle retail inventory is still below last year's levels, which he said tends to keep buyers at auction, supporting prices.

Average nonadjusted wholesale prices for 3-year-old vehicles, the largest model year cohort at Manheim's auctions, declined an aggregate 2.6 percent over the last four weeks, Cox reported.

Retail demand that was strong in April and during the first part of May appeared to erode in the week before and week following Memorial Day, Cox Automotive Chief Economist Jonathan Smoke told Automotive News on Monday. However, he said he was not convinced retail demand would see a more substantial erosion.

Retail used-vehicle prices are showing signs of depreciation, and interest rates on used vehicles have fallen since peaking in March and are pretty stable so far in June, Smoke said. There's a "good chance" consumer demand could become stronger as the calendar year progresses and as long as the U.S. does not go into a recession, he added.

"I think people are waiting for the availability of a vehicle at a specific price or at a specific monthly payment," Smoke said.

Cox Automotive estimated the retail used-vehicle supply in the U.S. was at 45 days at the end of May, unchanged from April but down from 49 days at the end of May 2022. Wholesale used-vehicle supply is estimated to have ended May at 24 days, down from 25 days at the end of April and 25 days at the end of May 2022.

Used-vehicle retail sales were steady in May compared with April, according to initial estimates from Cox Automotive. However, it estimated them to be down 11 percent year over year in May. It compiled those estimates by assessing retail vehicle sales based on observed changes in advertised vehicles tracked by vAuto.

The Black Book index fell 0.2 point to 175.4 in May, Black Book said Tuesday. That figure is 7.1 percent below where it was at the same time in 2022. And it's about 53 percent higher than in March 2020, when the coronavirus pandemic began.

In May, wholesale prices declined at a seasonally appropriate rate, which is why Black Book's index remained essentially flat, according to Alex Yurchenko, chief data science officer at Black Book.

"As consumer confidence remains low, the days-to-turn measure remained high and used inventory increased by the end of the month," Yurchenko said in a news release. "With the expected continued decline of used wholesale and retail prices through the summer, we expect the demand for used vehicles to improve even with the uncertainty in the larger economy."