June 10, 2024 | Used Car Wholesale Prices Continue Plunge, Gave up 59% of Pandemic Spike. But still up 35% from Jan 2020: EVs +72%, ICE Vehicles +34%

Used vehicle prices are in a historic downward spiral, unwinding the hugest-ever price spike that had built up during the pandemic. Despite the plunge, wholesale prices of vehicles sold at auction in May were still 35% above where they’d been in January 2020, according to Manheim, the largest auto auction house in the US.

With big differences: From January 2020, EVs are still up 72%; compact pickup trucks are still up 70%; heavy-duty pickup trucks are still up 46%; but at the other end of the spectrum, compact cars are up “only” 20% and midsize cars 25%. More in a moment.

Prices of used vehicles that were sold at auctions across the US dipped 0.6%, seasonally adjusted, in May from April, to $18,048, the lowest since March 2021, and down by $5,526, or by 23%, from the peak in January 2022, according to today’s Used Vehicle Value Index by Manheim. The index is adjusted for changes in mix and mileage. Not seasonally adjusted (blue), the index fell 1.2% in May from April, to $18,612.

Year-over-year, the index fell 14% in May. Prices fell in all major vehicle categories on a year-over-year basis, according to Manheim, a division of Cox Automotive.

These auctions are where dealers buy vehicles to replenish their inventories. Supply to these auctions comes from rental fleets that sell some of the vehicles they pull out of service, from finance companies that sell their lease returns and repos, from corporate and government fleets, etc.

Since January 2020…

From January 2020 through the crazy peak at the end of 2021, auction prices had spiked by a mindboggling 66%, or by $9,443.

The historic plunge since January 2022 has surrendered 59%, or $5,526, of that $9,443 spike so far.

But since January 2020, the index is still up by 35% — and as we’ll see in a moment, with EVs, which went through the biggest bubble spike of them all, still up 72%, while compact cars up only 20%, and with everything else in between.

All data below is not seasonally adjusted.

Prices of used EVs versus ICE Vehicles since January 2020.

EVs went through a ridiculous price spike during the pandemic, when Tesla-flipping was a thing, where people bought new Teslas and then sold them for $20,000 or whatever more than they’d paid. From January 2020 through July 2022, the Manheim index for EVs that sold at auctions spiked by 146% as the automotive industry had gone nuts.

Tesla killed the Tesla-flipping business when it started cutting prices of its models in 2022.  These price cuts nearly immediately lowered the prices of used Teslas going through auction, and the hot air was being let out. EV auction prices have come down sharply, but are still up 72% from January 2020 (blue in the chart below).

Vehicles with internal combustion engines (ICE) also went through a crazy price spike during the pandemic, up by 64% in May 2022, a huge historic ridiculous price spike that was nevertheless dwarfed by what EVs went through. The Manheim index for ICE vehicles is up 34% from January 2020 (red):

Prices of used pickup trucks since January 2020.

Prices of compact pickups at Manheim auction had spiked by 88% from January 2020 through May 2022. But they have not come down far and are still up by a ridiculous 70% from January 2020 (red line in the chart below).

Prices of heavy-duty pickups had spiked by 78% through May 2022, and they have given up a substantial portion of that spike but are still up 46% from January 2020 (purple)

Prices of full-size light-duty trucks had shot up 68% from January 2020 through May 2021. And then they fell, but are still up 39% from January 2020 (light blue).

Prices of used compact cars, SUVs, and vans since January 2020.

Prices of vans hat spiked by 70% through May 2022, amid a shortage of new vans, when the trades and delivery firms were chasing after everything that could be used as a cargo van. It eventually ended, and wholesale prices have given up over half of that price spike. In May, they were up 32% from January 2020 (purple).

Prices of SUVs and compact SUVs had spiked 63% from January 2020 through November 2021. And then they fell and gave up over half of that spike. In May, they were up by 30% from January 2020 (light blue).

Prices of compact cars sold at auction had jumped by 56% from January 2020 through May 2022. And then they dropped. In May, there were up by “only” 20%. That we can describe a 20% increase since January 2020 with “only” shows just how nuts inflation in the auto industry had gone (red).

These charts are documenting one of the most astounding periods ever in the auto industry. It remains unclear what hat gone through people’s minds that they were willing to pay those crazy prices, rather than wait and let the prices come down. FOMO? Sure, some people were forced buyers; their vehicle may have gotten totaled, or fell apart, or they were in the trades and needed it for business. But many other people replaced a perfectly good vehicle with something else and helped fuel those price spikes.

Americans need those price drops, not just to buy a vehicle, but also to pay for insurance premiums.

Resulting in a historic spike of motor vehicle insurance premiums.

Hopefully, the downward spiral in used vehicle prices will eventually end the mega-inflation in auto insurance premiums. The CPI for auto insurance was still up by 22.6% year-over-year in April, and by 46% since January 2022, when the used vehicle price spikes (replacement values for insurers) made their way into insurance premiums.

Wolf Richter June 10th, 2024

Posted In: Wolf Street

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