December auction prices increased 4.3% year over year, bringing the Manheim Used Vehicle Value Index to 137.6, the company announced last week.
“Three-year-old vehicles ended the month worth 2% more than they would normally have been worth had typical depreciation occurred instead of the abnormal appreciation observed this summer,” said Manheim Chief Economist Jonathan Smoke.
Two main factors that drove higher used-vehicle prices in 2018 and will likely continue in 2019 are new tariffs, which are causing vehicle prices to increase, and the Federal Reserve’s interest rate hikes. “Once the news started reporting tariffs, there was a demand increase,” Smoke said.
Barring the tariff and interest rate uncertainty, Manheim anticipates 2019 to be an average year for used-vehicle prices.
As for interest rates, “the Fed raised rates by a quarter-point as expected but was not as dovish as the financial markets had been expecting about the future trajectory of rate increases,” Manheim noted. “They did revise expectations from three increases in 2019 to two, but the market had been expecting them to become more cautious and communicate at most one increase in 2019.”
