Record High Price Trend in Used-Vehicle Market Set to Cool This Fall | Auto Finance News | Auto Finance News

Record High Price Trend in Used-Vehicle Market Set to Cool This Fall

© Can Stock Photo / gina_sanders

The wholesale market saw an unusual uptick in the price of vehicles this past quarter. Manheim documented an abnormal appreciation trend starting in June and running through September.

Wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 0.14% month-over-month in September, according to Manheim. This represents a record high and brought the Used-Vehicle Value Index to 139.9, a 3.7% increase year-over-year.

“Price appreciation normally only occurs in spring at the height of tax refund season,” said Jonathan Smoke, chief economist of Cox Automotive, on last week’s quarterly Manheim conference call. In fact, tax refunds spur the sales of the most used vehicles in a typical year, he added.

“The strong summer has left us with used-car prices, on average, up over the last 15 weeks by 1%, when they would normally have fallen by 3.6%,” Smoke said.

In the past five weeks, prices have stabilized. But sentiment reports reveal why there was such a strong summer season. Manheim found that dealer optimism is falling due to rising concerns about tariffs.

“The primary concern of franchise dealers about tariffs is that they will lead to higher prices,” Smoke said. “Dealers are also concerned about limited inventory and higher interest rates.”

With 47% of vehicles sold in the U.S. assembled abroad, section 232 tariff on aluminum and steel would increase import duties and taxes, and new rules on increased average pay for workers would drive the price of vehicles higher. “That tariff also becomes a potential penalty on Mexico and Canada for failing the new content rules,” Smoke said.

Late last year, the Trump administration increased the regional content requirements for light vehicles to 85% of contents coming from countries in North America, up from 62.5%.

Fast moving used retail inventory this summer also drove price demand. Market factors and sentiments signaled to consumers to buy sooner rather than later, according to Manheim.

“We didn’t predict that the president would pursue new auto tariffs,” Smoke said. “We believe that has been the catalyst boosting urgency and demand.”

Manheim predicts that the market will correct itself in the coming weeks and months.

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