Wholesale vehicle values saw their largest annual decrease in nearly 30 years at the close of 2022, but several key economic indicators provide promise as 2023 starts.
In Manheim Used Vehicle Value Index report released Monday, values were down 14.9 percent from December 2021. It was the largest annualized decline noted in the index’ history, tracking back to 1997. Luxury cars, midsize cars and SUVs all saw even larger decreases.
Overall, Cox Automotive Chief Economist Jonathan Smoke pointed out in the Manheim Used Vehicle Value Index call, consumer spending remains strong, up 18 percent from last year with little evidence of a pullback. Spending on vehicles saw nearly a 20 percent gain. Spending with travel agencies, other transportation and airlines were all up more than 50 percent.
The consumer sentiment also increased for a second straight month, gaining 4.3 percent in December. Unemployment also continued to be near record lows.
The supply of vehicles for new cars ended the year 22 days highers than at the start of 2022. That added supply of new vehicles brings hope for more trade-ins to come to the used car market. The used car supply was up only one day at the end of the year.
With the new inventory growth and more and more trade-ins, in the second half of the year, we expect (used car) sales to trend upward
Jeremy Beck, NIADA Vice President
“With the new inventory growth and more and more trade-ins, in the second half of the year, we expect (used car) sales to trend upward,” said NIADA Vice President Jeremy Beck.
The decline in wholesale values will also impact affordability, which has been an increasing issues for customers. The record prices from earlier in 2022 and higher interest rates squeezed some customers out of the market. The Manheim numbers showed the resale value for three-year-old units decreasing by 15 percent.
The wholesale days of supply remains below normal around 30 days.
The forecast for 2023 calls for 35.6 million used car sales and values to slip another 4.3 percent.
“With what we’re seeing, the independent space is in for a strong year in 2023,” Beck said. “It’s a good time to be a BHPH or used car dealer. They have the vehicles people want and that are affordable.”
