DETROIT — Wholesale used vehicle prices posted their largest decline last month since the beginning of the Covid-19 pandemic, as prices are set to stabilize during the second half of this year.
Cox Automotive reported Monday a 4.2% decline from May to June in its Manheim Used Vehicle Value Index to 215.1. It marks the third consecutive monthly decline and one of the index's largest monthly drops on record, according to Cox.
"Buyers at auction look to have taken an early summer break, and while used retail inventory has been improving over the last several weeks, we are expecting less volatility in wholesale price movements through year-end," Chris Frey, Cox senior manager of economic and industry insights, said in a release.
The index, which tracks vehicles sold at its U.S. wholesale dealership auctions, remains elevated from historical levels but is down 10.3% compared with June 2022.
The decline could help bring used vehicle pricing down for consumers in the months to come, as retail prices traditionally follow changes in wholesale prices.
The retail used vehicle market remains strong but was estimated to be off 6% last month compared with June 2022, according to Cox. The decline was led by rising availability of new vehicles and high interest rates, Cox senior economist Jonathan Smoke said Monday during a conference call.
"We are now at a turning point where the market returns to more balance and that balanced market is likely to deliver small but predictable changes in sales and less news about big changes in prices," Smoke said.
Used vehicle prices have been elevated since the early days of the Covid-19 pandemic, as the global health crisis combined with supply chain issues caused production of new vehicles to sporadically idle. That led to a low supply of new vehicles and record-high prices amid resilient demand. The costs and scarcity of inventory led consumers to the used vehicle market, boosting those prices as well.
Cox expects wholesale used vehicle prices to be down roughly 1.1% at the end of this year compared with December 2022. That's down from the company's initial forecast of a 4.3% decline, as pricing and demand were more resilient than expected to begin the year.
"The consumer is hanging in there," Smoke said. "We do not expect the remaining months of the year to deliver declines like we saw in the spring."
Cox expects the used vehicle wholesale market to experience a "slow and gradual recovery" in prices to pre-pandemic levels by 2028.