Used-car prices are still sky-high — but they may be easing
- Wholesale used-car prices fell 2.1% in February from an all-time high in January.
- Prices of used vehicles are still far above historical norms amid a shortage of new cars and trucks.
- Russia's invasion of Ukraine could extend the new-car shortage for at least several more months.
Wholesale used-vehicle prices fell in February from January, a sign that while prices remain near record levels, the surge in U.S. used-car prices may be easing.
Cox Automotive said on Monday that its Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at Manheim's U.S. wholesale auctions, declined 2.1% in February from January.
Still, on average, used vehicles are historically expensive. The index is down from its record high in January, but it remains up 36.7% from the year-earlier period.
Covid-related supply chain disruptions — in particular, an ongoing global shortage of semiconductor chips used in cars, trucks and SUVs — have forced automakers to limit their production of new vehicles. That, in turn, has triggered a surge in used-vehicle demand and prices over the past year.
While nearly all used vehicles are more expensive than they were a year ago, the increases haven't hit all categories equally. Cox's data shows that while prices of compact cars and vans soared 44.9% and 48.4%, respectively, in February year over year, prices of used pickups were up just 24.8%.
The discrepancy between trucks and compact cars reflects the state of new-vehicle inventories. Automakers including Ford Motor, General Motors, and Chrysler parent Stellantis have prioritized production of their highly profitable (and huge-selling) pickup trucks over less-profitable compact models amid the chip shortage. That means consumers hoping to buy a new compact car or SUV are more likely to be out of luck, and are more likely to seek a similar model on the used market than shoppers looking to buy a new truck.
But even pickup-truck production hasn't been immune from disruptions. All three of the big Detroit automakers have had to trim production of trucks at times over the past year. And it's not over: Ford last week confirmed that it has once again been forced to cut production of its Super Duty pickups and large SUVs because of semiconductor shortages.
Efforts are underway to boost production of chips in the U.S. and around the world. Chipmakers including Intel and TSMC began building new semiconductor plants in the U.S. last year.
Some automakers aren't waiting for those factories to get up and running, though. Ford said in November that it will partner with chip supplier GlobalFoundries to boost its product access. And General Motors has begun working with several chipmakers on new designs that will greatly reduce the product need in future vehicles.
Supplies of automotive semiconductors should begin to improve later in the year as new factories begin operating, which is expected to having the knock-on effect in reducing demand and prices for used vehicles.
In the near team, though, Russia's invasion of Ukraine may exacerbate the chip shortage. The countries are significant suppliers of neon gas and palladium, two commodities critical to chip manufacturing.