New data shows used car prices which surged during the pandemic, are now stubbornly remaining there despite recent weakness in the market.
According to the highly-watched Manheim Used Vehicle Value Index (which tracks wholesale used-car prices at dealer auctions), used car prices jumped 3.7% in February compared to January of this year, which was also higher than the prior month. Manheim says the 3.7% jump in February was the largest increase for the month on record since a 4.4% rise in February 2009.
Manheim says this jump in prices is not typical for the time of year.
“The U.S. auto market typically see[s] a strong spring bounce in used vehicle sales and prices, as demand grows, fueled in part by tax return season. This year, the bounce came earlier than anticipated,” said Jeremy Robb, Cox Automotive’s Senior Director of Economic and Industry Insights to Yahoo Finance. “We witnessed strong retail demand in January and early February, which surprised some dealers who were tight on inventory. The early bounce sent many dealers into the wholesale market to restock inventory, and that has driven up wholesale prices.”
After the index hit an all-time high of 257.7 in January 2022, it has been steadily falling every since, hitting a low of 217.6 in November of 2022, however it has been climbing back ever since, culminating in February’s big pop.
While February’s reading of 234.5 is down 7% year over year, the entire index still remains elevated compared to pre-pandemic levels. February 2020 saw the index at 156.6.
In addition to external factors like tax refunds fueling purchases, typically the spring sees some heightened purchase behavior as the weather warms, summer travel season approaches, and buyers head to dealerships looking for new rides.
Peculiar to his particular market as well is the fact that America’s aging fleet of cars isn’t getting swapped out fast enough. S&P Global Mobility finds the average age of cars and trucks on the road hit 12.2 years in 2022, an all-time high. S&P says this is the fifth straight year the average vehicle age has risen.
A global pandemic, ensuing parts shortages, and even the war in Ukraine sent automotive supply chains into chaos, leading to severely decreased inventories of new cars for purchase. This has concurrently led to lack of supply and higher prices for new cars, which have remained elevated and are still climbing. Manheim’s new-vehicle sales data shows a jump of 8.7% year over year in February, and up 9.1% month over month.
It seems the issues Americans have had buying cars lately — whether it’s been lack of supply or higher prices — have not fully abated just quite yet.