Amid tight supply and solid demand.
By Wolf Richter for WOLF STREET.
Inflation pressures in used vehicle prices, after the historic plunge from the historic spike, have now been rebuilding for an entire year.
Prices of used vehicles sold at auctions where franchised and independent dealers replenish their inventories jumped by 1.6% in June from May, and were up by 6.3% year-over-year, seasonally adjusted (red line). Not seasonally adjusted, prices were up by 5.1% year-over-year (blue line).
These year-over-year price increases, which began in November 2024, were the biggest since mid-2022 when the historic price spike petered out.
The data is from today’s Used Vehicle Value Index by Manheim, the largest auto auction house in the US, and a unit of Cox Automotive. The index is adjusted for changes in mix and mileage.
Supply at these auctions comes from rental fleets that sell vehicles they pulled out of service, from finance companies that sell their off-lease vehicles and repos, from corporate and government fleets, other dealers, etc. These prices are the costs for dealers. Prices that consumers pay when they buy from dealers, as tracked by the used-vehicle CPI, follow these wholesale prices with a lag.
Some of the price pressures come from EVs.
Used EV wholesale prices have been ratcheting higher for a year at a substantial rate, and in June were up by 12.1% year-over-year seasonally adjusted, and by 9.8% not seasonally adjusted, according to the data from Manheim.
Prices of used vehicles with internal combustion engines (ICE) were up year-over-year by 5.6% seasonally adjusted, and by 4.5% not seasonally adjusted.
Both EV and ICE-vehicle year-over-year price increases in June were the hottest since mid-2022, but EV prices increased by over double the rate of ICE vehicle prices.
EVs are still a small but rapidly growing segment of what’s going through auctions, supplied mostly by lease returns and rental fleets.
Amid tight inventories and solid demand.
“Even so, retail sales continue to run a bit hotter than prior years, and off-lease supply into the market is still on a downward path, two factors which should be fairly supportive of higher values as we move onward,” Manheim said.
Retail inventories are tight amid supply constraints from off-lease vehicles and solid demand. The inventory at used-vehicle dealers at the end of May (latest data available from Cox Automotive) ticked down to 2.21 million units, roughly flat year-over-year, amid higher sales, and down by about 20% from the same period in 2019.
Influx into the used vehicle market comes from vehicles that had been purchased new some time ago. They enter the used market via trade-ins, lease returns, fleet turnover such as at rental operations (2.5 to 3.5 million vehicles in a normal year), etc.
The influx of supply into the used-vehicle market is still seeing the effects of the semiconductor shortages in 2021 and 2022 that had caused global vehicle production to plunge. In the US, 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, and are not entering the supply pipeline of used vehicles.
As part of this scenario, leasing activity plunged during this time, and so the number of leases that have been maturing recently has been way down, and so supply from leasing companies, when they sell the two and three-year-old off-lease vehicles at auctions, has plunged. This may drag into 2026. And if demand remains solid amid tight inventory, prices will continue to feel the heat.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:
I’ve wondered if the auto makers were going to come close to fulfilling their goal of keeping supplies really constrained after the Covid years. It appears to me that it’s a bit of forest vs. trees problem. If you look at certain brands/models, there is an over supply, but the charts posted here indicate that we have yet to completely return to the “before days”.
I’m just hoping I can nurse my aging fleet along for another few years in the hopes that the models I want that currently have a too-tight supply will become more readily available.
Do we know what percentage of used car sales go through the wholesale/retail channel versus person-to-person sales (Craigslist, eBay Motors, etc)? I’d be curious to know if that is changing over time.
These sales here are wholesale (auctions) = supply to dealers which then sell to retail customers. This has nothing to do with person-to-person sales.
There are close to 20 million used-vehicle wholesales in a decent year; and close 20 million used-vehicle retail sales by dealers in a decent year. The industry adds these up, and it comes out to be about 38-39 million used vehicle transactions. Note that this includes some vehicles with multiple transactions… a used vehicle can change hands three times in a few months, no problem (1. customer trades it in; 2. dealer sells it wholesale to another dealer; 3. that dealer sells it retail to a retail customer).
In a few years before the pandemic, used-vehicle transactions by dealers and auctions hit 40 million-plus.
I got a low mileage 3-year old used EV last year for around 1/4 it’s original list price after rebates and credits when stuff was cheap in 2024. Saves me around a grand on fuel. These things fall off the depreciation cliff fast.
Was a good deal while it lasted.
1/4 retail new EV greater buy ! Wolf you predicted the rise which hits inflation 4 years ago with the plunge in new car supply and the lack of rental fleet supply.
Inflation will remain sticky with these rising used car prices .
You have a terrific mind with long term cascading influences on the economic data that drives much of our economy.thanks for them insight