Values of used vehicles continue to fall in June with the Manheim Used Vehicle Value Index (MUVVI) released July 9 declined to 196.1, ending the first half down 8.9 percent from a year ago.
Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) were down in June compared to May, resulting in values that declined 0.6 percent month-over-month for the second time in a row. The non-adjusted price in June decreased by 2.2 percent compared to May, moving the unadjusted average price down 10.0 percent year over year.
Jeremy Robb, senior director of economic and industry insights at Cox Automotive, noted the ransomware attack that affected dealers across the U.S. last month did not affect the overall trends of the industry.
No CDK Effect
“Wholesale value declines have been stronger than we normally see for much of the last two months,” said Robb in a press statement. “However, even though much of the industry was feeling the retail sales disruptions caused by the CDK outages in the latter part of the month, Manheim started to see wholesale price declines decelerate, ending the month at a seasonally normal pace.”
‘Sales conversion is currently running several points above the previous three years, including 2021, indicating that buyer demand is relatively strong despite all the uncertainty in the market.”
Strong Buyer Demand
June’s decline marks another month of a slide that began in 2021 when the MUVVI started trending downward. However, at the midway point of the year, signs are looking positive for the remainder of 2024.
Cox Automotive chief economist Jonathan Smoke believes “the decline may be nearing its floor, which should help stabilize the market through the summer months and rebound in the back half of the year.
“Between increasing demand, slowing price declines, and slightly better interest rates, all of our indicators point to an optimistic outlook for the rest of the year. We may even see a few months of growth before the end of 2024,” Smoke added.
Values Decrease in June
In the June Manheim Market Report (MMR), values saw weekly decreases above long-term average declines, with the first half of the month showing stronger depreciation while the last week slowed noticeably.
The Three-Year-Old Index decreased an aggregate of 1.5 percent in June, including a decline of only 0.2 percent in the last week of the month. Those same four weeks delivered an average decrease of 0.5 percent between 2014 and 2019, showing that depreciation trends are currently running higher than long-term averages for the year.
As for daily MMR Retention in June, which is the average difference in price relative to the current MMR, it averaged 97.8 percent, meaning market prices stayed below MMR values again this month. Against May, valuation models in June moved down a point on MMR retention. The average daily sales conversion rate rose to 57.4 percent, a rise over the previous month and higher than is normally seen at this time of year. For comparison, the daily sales conversion rate averaged 51.4 percent in June over the past two years.
View by Market
The major market segments all experienced seasonally adjusted prices that were down year over year in June. Compared to June 2023, pickups were the only segment that outperformed the industry, down 8.3 percent on the year.
SUVs declined by 9.3 percent year over year, luxury fell 9.9 percent midsize cars were down 11.0 percent, and compact cars were again the worst-performing segment, falling by 12.0 percent against last year.
Compared to the previous month, SUVs show the best results, rising by 0.3 percent against May, and compacts fell just 0.4 percent, less than the industry average of down 0.6 percent.
Performing worse than the industry, midsize cars fell by 0.8 percent, luxury was down 0.9 percent, and pickups declined the most against May, falling by 1.4 percent for the month.
Lease Returns Weigh on Used-Vehicle Market
Three-year-old vehicles, primarily sourced from lease returns, have consistently represented the highest volume age group sold at wholesale. However, the availability of these popular vehicles is declining and is expected to accelerate in July and persist through the rest of the year.
Cox Automotive forecasts a 12 percent drop in leases for Q3, followed by a 17-18 percent drop in the following quarter.
“In the second half of the year, the wholesale marketplace will start really feeling the impact of lower lease maturities coming back to the marketplace,” Robb said. “This is a pattern that is not going to go away for the next two years, and we’ll likely be dealing with it through 2026.”
