Update On The Current Used Car Market

You know I watch the auction every week, so you don’t have to. I’ve been watching used car prices closely since the start of Covid and they’ve been about as predictable as gas prices during a holiday weekend—up, down, and occasionally sideways. But right now, the latest data shows something important: used vehicle values are moving higher again.

According to Cox Automotive, wholesale used vehicle prices—what dealers pay at auction—are climbing as we head into the heart of the spring selling season. And when wholesale prices go up, retail prices at dealerships usually follow.

The closely watched Manheim Used Vehicle Value Index, which tracks pricing trends across the country, rose to 213.4 in the first half of March. That’s up 0.5% from February and a notable 5.3% higher than March of last year, according to CBT News.

Now, let’s translate that into plain English: used cars are getting more expensive again.

Why is this happening? It comes down to a simple case of supply and demand—something I’ve talked about for years. Demand is strong, and supply is still tight enough to keep prices elevated.

Dealer demand at wholesale auctions is running hot. Sales conversion rates—basically how many vehicles actually sell when they cross the block—are above normal levels, showing dealers are actively buying inventory to meet customer demand, according to Cox Automotive.

At the same time, supply isn’t exactly overflowing. Wholesale inventory is sitting at around 25 days’ supply in mid-March, according to Cox Automotive, which is relatively lean and puts upward pressure on prices.

Another factor helping push prices higher? Tax season.

Refunds are running about 11% higher than last year, and not all that money has hit consumers’ bank accounts yet. That means more buyers are expected to enter the market in the coming weeks, giving used car demand another boost.

There’s also a broader trend at play here. Retail sales—both new and used—have been climbing for several consecutive weeks according to Cox Automotive, which tells us consumers are still out there buying vehicles despite interest rates and affordability concerns.

Not all segments are behaving the same, though.

Luxury vehicles continue to perform well, and interestingly, electric vehicles are seeing stronger price gains than the overall market right now. EV wholesale prices are up more than 6% year-over-year, slightly outpacing traditional gas-powered vehicles, according to Cox Automotive.

So what does all this mean if you’re in the market?

If you’re buying a used vehicle, don’t expect bargains to suddenly appear. Prices are firm and may rise further as spring demand kicks into full gear. Waiting could cost you more, especially if supply stays tight.

If you’re trading or selling, however, this is good news. Higher wholesale prices generally mean dealers can pay more for trade-ins, and private sellers may also benefit from stronger values.

Looking ahead, Cox Automotive economists caution that factors like rising oil prices and global economic uncertainty could impact the market later this year. But for now, the data shows no signs of a slowdown.

Bottom line: the used car market remains resilient, and prices are climbing again—proof that even after all the volatility of the past few years, the basic rules still apply. When supply is tight and demand is strong, prices go up.

And in today’s market, that’s exactly what’s happening.

Photo: Paul Brennan/Shutterstock.com.