The issue has been tight used-vehicle inventory due to reduced influx of 2021/2022 model years after the new-vehicle shortages at the time.
By Wolf Richter for WOLF STREET.
What made the rounds today was the Manheim Used Vehicle Value Index that tracks wholesale prices of used vehicles sold at Manheim’s auctions where franchised and independent dealers replenish their inventories. From the low point in June 2024, the index through April has risen by 6.2%, seasonally adjusted.
The month to month jump in April (+2.7% seasonally adjusted) was smaller than the jump in July 2024 (+2.8%) that had caused me to muse in the headline on August 7, 2024: Used Car & Truck Prices Suddenly Bounce, Inventories Tighten: End of Historic Plunge that Pushed CPI Inflation Down?
As used-vehicle prices continued to rise, and on a year-over-year basis turned positive in November 2024, I fretted in a series of articles about those price increases and their impact on inflation (headlines and links at the bottom of this article). And the April jump was a continuation of this trend. But the media blamed the tariffs.
Those auction prices have been rising (seasonally adjusted) since the low point in June 2024, after having plunged by 20% from the crazy peak at the end of 2022. During the free-money era in 2021-2022, wholesale prices had spiked 65% because retail prices had spiked by 55%, and dealers were falling all over each other bidding up prices to replenish their stock.
It was the era when consumers were awash in free manna from heaven: Stimulus programs, PPP loans, mortgage forbearance (five deferred mortgage payments of $2,000 each puts $10,000 cash into the consumer’s bank account), additional unemployment benefits, student loan moratorium, eviction moratorium where the government paid landlords so renters didn’t have to pay and could instead blow the rent money on buying stuff and making down-payments on used vehicles…. The whole bit. It caused used-vehicle prices to explode because that’s one of the things people bought and made down-payments on with their free money. And when money is free, price doesn’t matter.
Not seasonally adjusted (blue in the chart above), the index has risen every month in 2025, which is normal for this time of the year. In March, it rose by 2.7%, but that was less than normal for March. And so on a seasonally adjusted basis, March prices fell 0.7%.
Then in April, the index increased by 3.3% not seasonally adjusted, which was more than normal for April, and so the seasonally adjusted index increased by 2.7%.
Retail prices as tracked by the CPI for used vehicles, which generally lag auction prices a little, began surging in September 2024, as dealers were raising their prices on tight inventories and solid demand. The CPI data for September was released on October 10, and it caused me to muse in the headline: Beneath the Skin of CPI Inflation: “Core CPI” Accelerates for 3rd Month on Sharp Flip of Used Vehicle Prices, Sticky Services Inflation.
The used vehicle CPI for April hasn’t been released yet. But in March, the used-vehicle CPI had dipped a little (seasonally adjusted), after the six-month surge of 7% (red line).
The problem has been tight inventories. Used-vehicle inventories at dealers have been tight in 2024 and 2025 amid solid demand and reduced influx of vehicles from lease returns and rental fleets of the pandemic model years.
During the period of the semiconductor shortages in 2021 and 2022, global vehicle production plunged. In the US, somewhere between 6 to 10 million fewer new vehicles were sold over the two-year period than might have been otherwise, and these 6-10 million vehicles are now missing from the national fleet, and are not entering the supply pipeline of used vehicles.
The inventory at the end of March at used-vehicle dealers was at 2.14 million units, according to Cox Automotive. Inventory at the end of April hasn’t been released yet, but it might be tighter still. These levels are down by about 25% from 2019.
Demand has been strong in the second half of 2024 and so far in 2025, with January and February sales surpassing the Januarys and Februarys of the prior three years, according to data from Cox Automotive. In March, sales of used vehicles at franchised dealers (such as Ford dealers) and independent dealers to retail customers jumped by 12.8% year-over-year.
And yet, both retail prices and wholesales prices dipped in March, tariffs and all (see above charts).
March is tax-refund season. Tax refunds make perfect down-payments for purchasing a vehicle. The whole industry salivates over them. And tax refunds were up. Individual income tax refunds through April 4 rose by 5.0% from a year ago to $211 billion, according to IRS data. The number of tax refunds rose by 1.4% year-over-year, to 67.7 million refunds. The average tax refund to individual taxpayers increased by 3.5% to $3,116. Tax refunds paid via direct deposit rose by 5.3% to $206 billion, and they were available for down-payments essentially right away.
Tax refunds are like stimulus checks that people take to the dealer for down-payments. And we discussed this here.
An additional factor may have been the insane hoopla and clickbait nonsense in the media about tariffs, which put consumers into an ultra-foul mood. And maybe they did some retail therapy in March, when overall retail sales were very strong, even at restaurants and bars. Used vehicles aren’t tariffed, nor are restaurants and bars. But the nutty stuff in the media could have caused an additional boost to demand for used vehicles, on top of the tax-refund demand.
I’ve been screaming about rising used-vehicle wholesale prices since August 7, 2024, in my articles that cover the used vehicle market (headlines and links below). And I’ve been screaming about rising used-vehicle retail prices since October 10 in my monthly articles that cover CPI. And no one paid attention, and suddenly, it’s the tariffs?
Aug 7, 2024: Used Car & Truck Prices Suddenly Bounce, Inventories Tighten: End of Historic Plunge that Pushed CPI Inflation Down?
Oct 7, 2024: More Evidence this May Be the End of the Historic Plunge of Used Vehicle Prices that Had Pushed Down CPI
Oct 18, 2024: Used Vehicles Getting Ready to Turn into Inflation Headwind, after Historic Plunge Had Powered Core CPI “Deceleration”
Jan 8, 2025: Why Used-Vehicle Prices May Put Upward Pressure on CPI, after Having Been a Powerful Contributor to Cooling Inflation
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I love this too much. Because of the comment thread from the last post that seemingly lead to this article. Not the car prices stuff. In seriousness, thanks for continuing to cover all of these varied things, Wolf. It’s probably a huge amount of work and it’s much appreciated.
Seems like some of the concern is how much auto companies are saying tariffs(whether true or not) will impact the price of new cars. In turn, that may drive more people used car market and drive up prices indirectly. Even as somebody who follows this on some level it is hard to separate truth from everything else, and even if I can, corporations will do what consumers will tolerate.
This is exactly what I cited as media BS in the article. Automakers might want to raise prices but demand will plunge if they do because they’re already having trouble selling what they built, and are having to throw huge incentives on their vehicles to move them. They’re loaded with new-vehicle inventory! If Ford hikes prices on its Mustang Mach-E, sales will collapse. It will just sit on these vehicles. And it will stop making them (in Mexico). The free money is gone. That stuff doesn’t work anymore.
And seems a solid chance the federal EV incentive will be eliminated. That would really hurt demand.
So you’re saying that the market would decide on the value instead of the government picking winners and losers? Sounds good to me! Let the EV Buyers buy one because they want one, not because my tax dollars make it cheaper.
The free money is gone. That about sums it all up. Back to much less money available for everything. And, unlike Covid, the demand will not spring right back. I ordered Rogoffs new book. Review in two weeks after my vacation.
Hi Wolf,
Great article, looks like a typo under “retail prices as tracked
by the cpi” etc. Sept. 2025 should read 2024.
Wired: Rejoice! Carmakers Are Embracing Physical Buttons Again
Amazingly, reaction times using screens while driving are worse than being drunk or high—no wonder 90 percent of drivers hate using touchscreens in cars. Finally the auto industry is coming to its senses.
From January, Europe’s crash-testing organization EuroNCAP, or New Car Assessment Program, will incentivize automakers to fit physical, easy-to-use, and tactile controls to achieve the highest safety ratings. “Manufacturers are on notice,” EuroNCAP’s director of strategic development Matthew Avery tells WIRED, “they’ve got to bring back buttons.”
Motorists, urges EuroNCAP’s new guidance, should not have to swipe, jab, or toggle while in motion. Instead, basic controls—such as wipers, indicators, and hazard lights—ought to be activated through analog means rather than digital.
A smattering of automakers are slowly admitting that some smart screens are dumb. Last month, Volkswagen design chief Andreas Mindt said that next-gen models from the German automaker would get physical buttons for volume, seat heating, fan controls, and hazard lights. This shift will apply “in every car that we make from now on,” Mindt told British car magazine Autocar.
And bring back roll down windows. If the car’s electronics, battery, or computer fails, you are trapped. I have one those tools with a pointy thing at the end that will supposedly break a car window. I keep it in the car.
Everything is because of the tariffs these days. It’s the bogeyman-de-jour.
“You will pay more for your iPhone because of Trump’s tariffs.”
No, I won’t. I just won’t buy an iPhone. It’s not like water and air where I must have this exact product no matter the price. Tim Apple is not holding a gun to my head to buy the product (or any discretionary product) at the higher price.
Plus smartphones are exempt, for now.
Wolf:
Don’t worry. We are listening.
There is a huge auto crushing facility near me where dozens of cars are towed in daily, crushed and then shipped out for melting. (I have been told they end up being exported to China as scrap steel.) Many of these are rather late models and I am surprised that they are being scrapped rather than repaired.
Tight used-vehicle inventory? SE Tennessee. Our used vehicle lots are bulging. Overflowing onto adjacent property actually. Hoods up. Signs with deals. All over town. Sales people outside beckoning buyers. What’s happening? Local abberation, oddity?
Why used vehicles? The new ones have an ever shrinking time horizon. The older ones last longer, and cost less. Besides you can repair them.