Wholesale used-vehicle prices decreased 1.6% in July 2023 from June 2023 on a seasonally-adjusted basis, and they’re down 11.6% from a year ago.
According to the Manheim Used Vehicle Value Index, the non-adjusted price change in July decreased by 3.8% compared to June, moving the unadjusted average price down 10.7% year over year. Manheim said price declines were above average through most of July, although pace slowed at the end of month.
“The July drop of 1.6% is an indicator of slowing wholesale price declines, at least when compared to the month-over-month losses we’ve seen since April,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive.
While sliding prices may seem like good news, Frey says, they should be kept in perspective.
“From July 2020, there were 22 straight monthly double-digit increases through April 2022; we’ve had just six double-digit declines since October last year, with only four of them consecutive. Keeping to the April theme, we’re now back to the same index value last seen in April 2021.”
The ZeroSum Market First Report predicted an end-of-month inventory down from June, but 21.5% above the January 2023 low. And used EV inventory share in the U.S. rose 10.9%.
The nitty gritty
According to Manheim, all categories had decreases from the previous month, with sports cars the lone exception, with prices rising 1.6%. Pickups lost less than the industry month over month, down 0.6%, while vans slumped 3.2%, compact cars dropped 2.8%, and luxury slipping 2.4%.
But when compared to the previous year, the declines are more dramatic. Compact automobiles saw their prices slump 15.9% year over year, followed by midsize cars at 14.2%, luxury vehicles at 12.6%, SUVs and Crossovers as 11.5%, Vans at 99% and Pickups at 6.6%.
Yet declines are slowing as inventory decreases, as dealers ended July with a 46-day supply, versus a 49-day supply at the end of June. And both are lower than the 54-day supply in July 2022.
Used car price slump expected to continue
But increasing used car inventories and slumping prices are expected to continue as supply chains return to normal and automakers experience overproduction, reversing industry trends that have been driving up costs in recent years, according to a UBS analysis. In fact, according to UBS, the global auto industry will produce 6% more cars than it sells this year, creating an excess of 5 million automobiles that will only move with cash on the hood.
Sales of new vehicles fell by volume in July compared to June, falling 5.1%. The seasonally adjusted annual rate (SAAR) for July was 15.7 million, up 18.2% from 13.3 million in July of previous year and essentially steady from the slightly revised 15.7-million pace for June.
According to UBS’s estimate, global manufacturing will exceed USB’s predicted sales of 81 million vehicles in 2023, hitting 85.8 million units. The report suggests that automakers are getting ready for a price war, citing EV manufacturers slashing prices as the opening salvo.
Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result,” UBS said in a statement. “The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment.”
A price war in the new car segment will have a direct impact on wholesale, which in turn impact wholesale and retail used car prices.