Car dealers saw a slight decrease of about 1% in the prices of used cars at auctions during the first half of July compared to June. This is noteworthy considering that wholesale prices had already fallen over 10% in June compared to the previous year.
The Manheim Used Vehicle Value Index, provided by Cox Automotive’s Kelley Blue Book, reveals that dealers’ payments for used cars are now 11.1% lower than they were a year ago.
When wholesale prices experience a decline, retail prices typically follow suit after a period of six to eight weeks. Although there has been a delay this year, used car lots are finally seeing the impact of these price drops. In June alone, the average price of a used car decreased by $109.
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Kelley Blue Book analysts anticipate additional price drops; however, they do not expect a retail decrease of 11% to exactly match the 11% wholesale drop.
During the peak of the COVID-19 pandemic, American automakers produced approximately 8.1 million fewer cars than usual. These vehicles will never enter the used car market, which will continue to exert upward pressure on used car prices in the years to come.
The degree of price drops will vary across different market segments. In early July, dealers paid around 6.5% less for pickup trucks compared to the previous year. Conversely, they paid 15% less for compact sedans. Sports cars were the exception, as they achieved a 2.6% increase in auction prices.