Used car prices fell nearly 15% in March

Used vehicle prices in the United States declined in March amid strong sales and higher supply levels, economists said. The prices were down by 14.7%, the highest year-over-year decrease since December 2022.

On Friday (April 5), Cox Automotive economists provided an update on the new and used vehicle markets in the United States.

Jonathan Smoke, chief economist for Cox Automotive, said vehicle sales were strong in March amid tax refund season. Used retail sales increased by 6% from February and 7% from March 2023. He noted that sales softened toward the end of March.

Supply was tight but started to rise by the end of the month as sales moderated. Recent data shows a new vehicle supply of 2.8 million vehicles, up 49% from the same time last year but down 26% from 2019. Based on days supply, used vehicle inventory is up 7% from last year and 4% higher than in 2019.

Jeremy Robb, senior director of economic and industry insights for Cox Automotive, said wholesale used vehicle prices declined in March from February. The Manheim Used Vehicle Value Index declined by 0.4% in March from February and by 14.7% from March 2023.

Robb said the index has had year-over-year declines for 19 consecutive months. March had the highest year-over-year decline since December 2022.

He said the wholesale price of a three-year-old vehicle is about $29,300, down 5% from this time last year but up by 50% from pre-pandemic levels.

Robb said wholesale sales volumes are expected to rise by 3% in 2024 from 2023 levels. He said this metric is a key factor for the used vehicle market and is likely to keep inventory tight for the year.

Scott Vanner, senior analyst of economic and industry insights for Cox Automotive, said vehicle repossessions are up 17% from 2023 and about 5% higher than 2019 levels. Robb said repossessions are expected to rise by 9% in 2024 and flatten over the next several years. He attributed this to high interest rates reducing loan demand and limiting a rise in the loan base.

Used vehicle prices are expected to fall by 0.7% in 2024 from 2023. In 2025, prices are projected to rise by 2.5% from 2024. Used retail sales are projected to rise by 3.2% to 19.6 million in 2024 from 19 million in 2023. New retail sales are expected to increase by 1.6% to 12.9 million from 12.7 million.

BROADER ECONOMY
Smoke said U.S. consumer spending on credit and debit cards moderated in January and February before rising by 3% in March for the week ending March 16 from the same period last year. Spending is strong for services, education, travel and drug stores. Consumer sentiment was up narrowly, but rising gas prices have weighed on the gains. U.S. gas prices have risen to an average of $3.55 per gallon, up 1% from this time last year. Gas prices are likely to continue to rise this spring amid higher crude oil prices.

In March, 303,000 jobs were created, which was higher than projected, he said. On average, 276,000 jobs were created in each month in the first quarter of this year. That’s down from 305,000 in the same period last year but remains stronger than 2019 levels. Unemployment declined to 3.8% in March. Unemployment claims are higher than this time last year and in 2019. Smoke said this indicates that job losses are lasting longer, but initial unemployment claims remain low. He said job churn has stopped, and wage gains have slowed. He attributed immigration as a driver for the expanding labor force.

In 2023, 3.5 million jobs were created, and he expects at least 2 million jobs will be created this year. Smoke said rates are near 24-year highs, and this limits vehicle demand as consumers have expectations for lower rates soon. However, new jobs contributed to higher transportation demand and rising credit conditions.