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Used car and truck prices fall further in historic drop, surrender 60% of stunning 2-year surge

But used EV prices are still up 61% since January 2020, used ICEs are up 31%. When will they bottom out? Compact cars will become affordable again.

By Wolf Richter for WOLF STREET.

Prices for used cars, SUVs, pickups and vans sold at auctions across the U.S. fell 0.6% in June from May and 8.9% year over year to $17,934 after adjusting for seasonally adjusted factors. That’s the lowest level since March 2021, after losing 60%, or $5,640, from a staggering $9,443 increase between January 2020 and May 2022 (red on the chart).

Seasonally adjusted, wholesale prices fell 2.2% in June from May and 10.0% year over year to $18,206 (blue), shedding 52%, or $4,690, from a $9,088 jump between January 2020 and May 2022, according to today’s Used Vehicle Value Index from Manheim, the largest U.S. auction house. The index is adjusted for changes in mix and mileage.

The question on everyone’s mind: How much will wholesale prices fall to offset this mind-boggling increase that should never have happened? When will they bottom out? For consumers, prices haven’t fallen enough and remain very high:

Prices across all major vehicle categories fell in June, both month-on-month and year-on-year, according to data from Manheim, a division of Cox Automotive.

The largest price drops in June compared to May occurred in the following categories:

  • Full-size van: -8.9%
  • Sports cars, all: -6.4%
  • Electric vehicles: -6.3%
  • Full-size car: -6.2%

Dealers buy at these auctions to replenish their used vehicle inventories. Supply comes from rental fleets that sell some of their retired vehicles, from finance companies that sell lease and repo returns, from corporate and government fleets, other dealers, etc.

The sharp monthly price declines in June may have been a secondary effect of the crisis, when operations at nearly 15,000 dealerships were catastrophically disrupted from June 19 through the end of June, when the cloud-based CDK dealer management system used by those dealers was shut down by a ransomware attack. The largest publicly traded dealers — typically the bulk buyers at these auctions — have already warned of a potential impact into the second quarter. Automakers have also addressed the CDK crisis in their June and second-quarter new-vehicle delivery reports.

Electric vehicles vs. combustion engine vehicles from January 2020

There was a time during the pandemic when selling Teslas was popular. People would buy new Teslas from Tesla and then resell them shortly thereafter as essentially new, but legally used, for a big profit, because used car prices in general had gone up a lot, and Tesla prices were even higher because Tesla production couldn’t meet demand.

The Tesla flip contributed to a massive 145% increase in used EV prices from January 2020 to the peak of growth in July 2022. Then Tesla lowered its prices in 2022 and in doing so killed the Tesla flip. There were hopes that the Cybertruck flip would be profitable, but those hopes were dashed as well. A used vehicle should sell for a much lower price than the same vehicle new, that is the essence of the car business and that is where we are again. And all that Tesla flip madness is now in the rearview mirror.

Used electric vehicles: Prices rose a staggering $22,568 from January 2020 to July 2022, by far the most in any vehicle category, which is a sign of absolute madness. Prices have already shed 54% of that increase, but are still 61% higher than they were in January 2020 (red on the chart below).

Used ICE vehicles: Prices have also risen during the pandemic (+64%), but not as much as EV prices (+145%). They have also fallen, but from lower peaks. And they have now recouped 51% of the pandemic’s jump (blue).

Used Car and Truck Prices from January 2020…

Auction prices rose a staggering 65%, or $9,088, from January 2020 to their peak in May 2022, on a seasonal basis, and then began to decline, now shedding 52% of that gain.

But look at the bright side: as of January 2020, despite the ongoing historic decline, wholesale prices are still 32% higher than in January 2020. The data below is not seasonally adjusted:

Looking at it this way, EV prices are still up 61% since January 2020 (red in the chart below). ICE prices are still up 31% (blue):

Prices for used vans from January 2020

Full-size light commercial vehicles:Prices rose 68% from January 2020 to their peak in May 2021. And then there was a sharp decline, losing 48% of that gain but still up 36% since January 2020 (light blue in the chart below).

Compact transducers:Prices rose by 88% from January 2020 to May 2022. However, they did not fall significantly, only reducing 25% of the price increase caused by the pandemic, and are still up a staggering 66% since January 2020 (red line).

Heavy pickup trucks:Prices rose 78% from January 2020 to May 2022 and have now lost 46% of that gain, but are still up 42% since January 2020 (purple)

Used SUV, compact car and van prices from January 2020.

SUVs and compact SUVs:Prices rose 63% from January 2020 to November 2021. Then there was a sharp decline and a 57% drop, but they are still up 26% since January 2020 (light blue).

Vans: Prices rose 70% through May 2022 and have since recovered by 63% of that increase, but are still 26% higher than January 2020 (purple).

Compact cars: Prices rose 56% from January 2020 to May 2022, then fell. So far, prices have shed 69% of the pandemic-related increase and are up “only” 17% since January 2020.

The affordability of used compact cars is making a comeback. Compact cars are now the closest to their pre-pandemic trend, compared to all major categories. At an index price of $9,500, they’re up “only” 17% since June 2015 — nine years ago!

But Americans aren’t fans of compact cars. So retail demand for new compacts remains moderate; rental fleets are the big buyers. For automakers, the category is a low-margin, highly competitive business. American automakers have been pulling out of compact ICEs because they’ve had trouble making money on them and have been more interested in fawning on Wall Street through stock buybacks. All of the ICE compacts of recent model years are foreign brands. But that dynamic is helping Americans find affordability there again:

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