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.
“And seems a solid chance the federal EV incentive will be eliminated. That would really hurt demand.”
Good
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.
Except that the free money is not “gone,” it’s parked on the balance sheets of the billionaires, driving the everything bubble higher and higher. This is, by no means, over.
The media blames Trump for everything so why not the increase in used car prices even though it started months before he became President.
Half the country believes the nonsense put out by the MSM.
Part of that problem is a result of the poor education many in the US receive and is shown by the poor trend in falling international ranking of the US compared to other countries.
Well, Biden was blamed for everything that happened in his term. That’s how it rolls, fair or not. Best to ignore three blame game and focus on the data and trends and figure out how to use in your investing.
I’ll let you know when I sell my 2016 1 ton diesel with 127k miles on it
don’t need anymore but feel it’s worth close to what I paid 3 years ago
better OLDER DIESEL than newer 3,000 chip ones(from china)
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.
If iPhones (and all the other Chinese brands) were priced out of the market by tariffs then Samsung could easily raise its prices by say 10 percent and enjoy the relative lack of competition. So if you buy any brand of cell phone, you are going to pay more.
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.
Where are you going to find the mechanics to fix them up? That’s a lost trade anymore.
Plus, cars are disposable. The auto industry really likes that feature.
New cars are exquisitely designed to last the warranty period–e.g. 6yrs/60K miles or whatever–and not much more (that’s what your ‘lifetime’ transmission and differential fluids are capable of). They are not in the least designed for maintenance–not that they ever were–and at least one requires dropping the engine and front sub-frame to change the oil filter. Many are turbo-supercharged, for mileage requirements–which will only be met within certain, conservative driving regimens–and are over-stressed (and the turbos themselves will fail when, not if). Diesel engines, once robustly over-engineered/built are completely hamstringed by odious emissions bolt-ons (but are otherwise gross polluters).
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?
Sounds like a local aberration. On the other hand, that’s a good problem to have – for you. I don’t know why things should be different in Tennessee, but perhaps the stealerships in your area got a glut of new production in past years compared with other places.
On a new car inventory note….a shut down grocery store near me became a Tesla showroom (In Texas) last Fall. Outside the doors are about 200+ new Tesla’s just gathering dust. There are Model 3’s, Model Y’s, CT’s, Model X & S’s. Not much activity going on there from what I can tell by driving by it every day.
You cannot tell anything about the industry by driving by some dealer lots. What you’re seeing is the act of making money by selling used vehicles. That’s how it works. You promote, you advertise, you show, you entice, you get people in, you make deals and close deals, and you go to the auction to replenish your inventory. That’s how used-vehicle dealers run their businesses to make money. You cannot tell by driving by if industry inventories are tight. All you can see is the act of selling used cars. Don’t imagine results you cannot see.
No one said that the industry was out of used vehicles. That would be a shortage, and there was never one, not even during covid. What we have is an industry inventory that is 25% below 2019 levels. And you cannot see that by driving by some car lots.
My first thought was flood-damaged. How are the buyer protections in Tennessee?
Maybe the flooded autos from last years hurricane. At least it was not salt water.
Maybe the price margin?
So many have taken the plunge only to find out their driving around in a ticking time bomb, GM 8 speed transmission failures, 10 speed transmission failures, GM valve lifter failures, and now the infamous 6.2L wrist pin catastrophic failure which could happen at any moment. There will be plenty of trade ins and folks trying to escape these constants problem before that extended warranty is up. Used car market ain’t what it used to be to be regarding quality. I see so many searching for pre covid Toyota, Honda, and Nissan vehicles, which now command premium prices. Most will be better of buying new with manufacturer warranty as prices depreciate/deflation takes hold. I’ve got to given car manufacturers credit though, they made shit ton f money off consumers during and post Covid pandemic.
IPhones are not like cars where there are 20 well known brands. The North American market is dominated by Apple, Samsung and Google. If iPhones (and all the Chinese brands) were priced out of the market by massive tariffs then Samsung could easily raise its prices by say 10 percent and enjoy the relative lack of competition. So if you buy any brand of cell phone, you are going to pay more.
LOL, if prices are raised and are too high, enough people will just hang on to the phones they have, demand will plunge by 20%, the stock will tank, and those price increases will be rolled back, or reduced-price models will be introduced. That’s how price works.
Smartphone unit sales already stagnated before any tariffs because they’re already overpriced, and price hit a ceiling, and demand has stagnated because of that.
The free money era is over. Now price matters again. Listen to what companies are telling investors. That’s why the smartphone-makers were begging Trump to cut the tariffs because they CANNOT pass them on without watching their sales collapse. Those tariffs would just come out of their huge profit margins, and they would have to cut back on their share buybacks.
I’m seeing a lot of collectible cars come on the market at what seems to be lower prices. Perhaps that particular bubble
has popped.
Collectible cars are more like stocks (investments) than mass-market used vehicles (that are being “consumed” down to salvage value).
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.
Eh that’s not true. Cars last longer than they ever have. 200K miles is almost nothing now.
Now are they harder to work on? Yes, but old engines mostly sucked.
In fact, newer car longevity could explain some of the lack of supply of used vehicles.
Agree!
But buying a used vehicle makes financial sense. If you buy a 2-year-old lease-return or former rental car with 25,000 to 35,000 miles on it, it looks close to new, will last for a very long time (or until totaled), and can save you $10,000 or $20,000 or more in acquisition costs. Or, for the same amount of money, you can buy a far nicer used vehicle than new vehicle.
There are reasons to buy a new vehicle, but you’ll pay more. So it’s just a decision people make based on their priorities and preferences.
“But buying a used vehicle makes financial sense”
Yep, I bought my use Mitzibushi Mirage with 60,000 miles on it and it was spotless inside and out. Looked and felt like a new car. I save $10,000 over a new one. It was a rental car in Missouri and sold here in Maryland. I wonder how they kept it in such good shape. Paid only $11,700.
Just buy a damn toyota and be done with it.
Yesterday Ford announced price hikes on Maverick, Bronco Sport and Mach-E built after May 2. Extra $600-2000 per vehicle, depending on features.
One thing we might see with automakers is strategic price hikes, where they use price hikes on some models to fund price stability (and market share stability) on other models.
Big box retailers have talked about that for a while now. They have so much data on the typical shopping cart that they can strategically increase prices on some items without shoppers noticing enough to reduce overall demand. Or to protect market share with the highest margin shoppers.
This is what I said above about Ford’s price increases:
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.
Ford is screwed. But GM is screwed even more; it imports vehicles from China (Envision), South Korea, Mexico, and Canada. GM said in an earnings warning a few days ago that the tariffs are going to come out of its profits to the tune of $4 – $5 billion this year. Ford also issued an earnings warning because it will have to eat the tariffs or what its sales collapse, but the number was smaller (a hit of about $1.5 billion) because it imports a smaller share of its vehicles than GM.
There are many models made in the USA with far more US content, and therefor far fewer tariffs, from Tesla, Honda, Toyota, Hyundai-Kia, etc. and if Ford jacks up the price of the Mach-E (made in Mexico), people will just buy an EV made in the USA. That’s the purpose of tariffs.
New vehicle inventory in the US is large, and automakers have to CUT PRICES (throw in incentives) to sell it and to keep their plants running. So price increases are going halt sales. It’s as simple as that. The free money is gone, prices are VERY HIGH already, and there is no more room left to hike, and all automakers know this.
Great article (and follow up comment) Wolf.
I am feeling my age today, my knee jerk reaction to seeing the Manheim increase was, “This had to be Cash for Clunkers that created this increase”. Was 2009 so long ago? :)
Have a great day.
Good information. Potentially a leading indicator for new car prices ahead of the supply chain “reorganization” that tariffs are forcing upon the industry? Yes, I am a cynical bastard, but appreciate Wolf’s thoughts.
Have you bought a battery lately?
Buy them in bulk online or at a place like Costco, and you’ll save a ton of money. If you set foot in a Walgreens, you’re just going to get ripped off.
In Florida the prices of used cars is off the charts. Even stuff from 1990’s the prices being asked are crazy. I know several people that went out of state and saved a bundle. We have more buy here pay here lots now than liquor stores.
Prices went off the chart in 2021 and 2022, spiking by 60%. And they have come down from there but are still very very high. Those high prices are what you’re seeing.
“We have more buy here pay here lots now than liquor stores.”
You also have some of the biggest shiniest new and used vehicle dealers in the country. So go check them out. The buy-here-pay-here lots you’re talking about are a small sliver of the used-vehicle business catering to subprime-rated customers by ripping them off because they cannot buy at a regular dealer because they have a subprime credit rating.
Interesting the are no more Atlanta GDP now headlines
The new US-UK trade deal will lower the tariff on UK made cars coming into the US from 27% to 10%. Manufacturers and dealers can easily absorb the 10%, since most all the cars are probably marked up well above 10%. Now I can start thinking about buying a Jaguar or a Rolls, maybe go down market and get a Range Rover. Seriously, I would only buy Hondas if I needed a car. My 2014 Honda Accord is doing fine.
I wonder if Wolf knows what the typical mark-up is on cars, not the MSRP, but the (price sold) minus (the out the door of the factory cost).
The Wolf who cried: Boy…. those prices sure are going up!