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Used Vehicles Resume Price Decline Dropping 2.7% in May

Last updated 03/15/2024 by

SuperMoney Team

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Summary:
The Manheim Used Vehicle Value Index reports a drop in used vehicle prices, indicating shifts in the used car market. The wholesale used-vehicle prices saw a 2.7% decrease in May, a result influenced by various market conditions, including consumer confidence, gas prices, and inventory levels. The analysis, however, suggests the rate of decline might slow in the following months.
The used vehicle market plays a crucial role in the automotive industry, providing a window into consumer behavior, economic conditions, and broader market trends. Central to understanding these dynamics is the Manheim Used Vehicle Value Index (MUVVI). Developed from statistical analysis of over 5 million annual used vehicle transactions, the MUVVI offers insight into pricing trends and fluctuations in the used vehicle market.

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The Manheim Index and Its Importance

Regarded as the leading indicator of pricing trends in the used vehicle sector, the Manheim Index provides data that’s not indicative or predictive of any individual remarketer’s results. Instead, the index gives a broad overview of the market, allowing financial and economic analysts to gauge market health and direction.

Market Performance in May

In May, the MUVVI reflected a 2.7% decrease in wholesale used-vehicle prices from April, indicating a 7.6% decline year on year. Price erosion continued, but the rate of decline might decelerate in the coming months, considering the lower auction prices from May through November of the previous year.

Segmented Market Behaviour

Different segments within the used car market demonstrated varying price trends. Compared to May 2022, pickups, compact cars, and vans showed less decline than the industry average. On the other hand, the luxury segment, SUVs, and midsize cars showed a steeper decline. The report indicates market conditions have shifted, slightly favoring buyers; however, the tight supply keeps the market balanced.

Pros and cons of a drop in used vehicle prices

WEIGH THE PROS AND CONS
Here is a list of the benefits and the drawbacks to consider about the drop in used vehicle prices.
Pros
  • Affordable options for consumers: With a drop in prices, used vehicles become more affordable for buyers, making it an excellent time to purchase.
  • Good for dealers with high inventory: The reduced prices could help dealers sell off excess inventory more quickly.
  • Stimulates the economy: Lower prices can stimulate demand, resulting in more vehicle sales and potential economic growth.
Cons
  • Less profit for sellers: Lower prices mean dealers and private sellers make less profit on each sale.
  • Depreciation hit for owners: Current owners of used vehicles may see their car’s value drop.
  • Buyer’s market: Sellers may find it challenging to sell their vehicles in a market that favors buyers due to an abundance of choices.

Key takeaways

  • Used vehicle prices experienced a decline in May, as evidenced by a 2.7% drop in the Manheim Index.
  • The rate of price decline could decelerate in the upcoming months.
  • Despite some segments experiencing steeper declines, market conditions are shifting towards favoring buyers but remain balanced due to tight supply.
  • Used vehicle market trends are influenced by multiple factors, including consumer confidence and gas prices.

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