Used car prices fall 7% in 2023, though still elevated compared to pre-pandemic

Used car prices fell 7.0% in 2023, the second consecutive year of price declines in the sector after a massive rise in the pandemic era.

The Mannheim Used Vehicle Value Index (MUVVI), which tracks the prices of used vehicles paid at wholesale auctions on a seasonally adjusted basis in the US, ended the month of December down 0.5% compared to November. For the year, used prices fell 7.0% from a year ago to a 204.0 reading and are now down 21% from December 2021.

“The decline in December capped a volatile year,” said Jeremy Robb, senior director of economic and industry analysis for Manheim’s parent company Cox Automotive. “The spring surge was much more pronounced than expected in 2023, and prices declined just as quickly after that surge, ending more calmly in December as expected. The 7.0% year-over-year loss was larger than our original forecast, but pales in comparison to the nearly 15% decline we had a year earlier.”

The MUVVI shows that used car prices continued to fall in December. (Mannheim) (Mannheim)

Seasonally adjusted, December used vehicle purchase prices fell even more, down 2.0% on the month and 7.7% on the year. Although the MUVVI fell to 204.0 during the month, it is still much higher than December 2019’s pre-pandemic reading of 151.5.

Despite the price declines, Manheim said the average daily sales conversion rate increased by 53.8%, indicating improvement and relatively strong demand. Mannheim analysts noted that broader measures of consumer confidence such as the Conference Board’s index and the University of Michigan’s index of consumer sentiment also improved in December, indicating improving conditions for the used car market and buyer.

Looking at different types of used vehicles compared to a year ago, the Manheim index found that luxury cars, pickups and SUVs lost less than the overall market, down 6.9%, 6.5% and 6.1% respectively. %. Smaller cars such as hatchbacks were the worst performers, down 11.7% for the year, followed by mid-size cars, losing 8.1%, and vans, down 7.9%.

The MUVVI also tracks broader trends seen in used vehicles at the government level, with November’s CPI (Consumer Price Index) showing used car prices fall 3.8% annually, but with a growth of 1.6% during the month. The December CPI report is scheduled for release on January 11.

A sign highlighting the interest rate hangs below the sticker of an unsold 2023 model on display outside a Mercedes-Benz dealership Thursday, Nov. 30, 2023, in Loveland, Colo. (AP Photo/David Zalubowski)

A sign highlighting the interest rate hangs below the sticker of an unsold 2023 model on display outside a Mercedes-Benz dealership Thursday, Nov. 30, 2023, in Loveland, Colo. (David Zalubowski/AP Photo) (Associated Press)

Looking ahead to 2024, Cox Automotive analysts predict a less volatile year than 2023 in terms of pricing, although they caution that they have been “learned to expect the unexpected in the wholesale market.”

Cox believes the market for new vehicle sales will also improve. Cox reported that in December, total U.S. new light vehicle sales rose 13.0% for the year, good for a seasonally adjusted annual industry rate of 15.8 million, up 16.8% from last year. a figure of 13.5 million.

The latest December and full-year sales reports from GM, Ford and even Tesla show the market still remains strong for new vehicles, even amid higher interest rates and geopolitical tensions. Earlier on Monday, Rolls-Royce reported a record 2023, showing that even the top end of the market remains resilient.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him Twitter and on Instagram.

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