These prices were “not typical” for January: Mannheim auction house.
By wolf richter For wolf street,
OK, it was quick. Wholesale prices of used vehicles, when they are sold at auction, were set to face the biggest jump ever in December 2021. Then till November 2022 the prices declined the most. But they changed in December, and they jumped in January — when they usually don’t change much by season, according to Mannheim, the largest auto auction house in the U.S. and a unit of its Cox Automotive,
Price hike from December 2022 to January 2023:
- Not seasonally adjusted: +1.5%.
- Seasonally adjusted: +2.5%, the second month in a row of growth (+0.8% in December).
- Six out of eight segments showed an increase in prices. Pickup trucks the most, +3.6%.
- Rental Risk Units: +2.8%. Fleet rental vehicles have to sell themselves instead of returning them to the manufacturer under their fleet programs.
- Three-year index: +1.2%, generally little changed in January.
Mannheim said these price increases were “not typical” for January. We’re looking at the dollars for the seasonally adjusted (green) and not seasonally adjusted (red) Mannheim Used Vehicle Value Index (both adjusted for changes in the mix and mileage of vehicles sold at auction):
More signs of rising demand and prices.
The average daily sales conversion rate increased to 59.4%, which is well above the January average. For example, in January 2019 it was 57.7%. “The higher conversion rates indicated that the month saw sellers with more pricing power than is typically seen for this time of year,” Mannheim said.
The upward pressure on prices was exacerbated by dealers more eager to acquire inventory, as same-store retail sales of used vehicles rose 16% in December to January and 5% year-on-year, data based on preliminary estimates showed. According to DealerTrack, a service of Cox Automotive.
Year-to-date, wholesale prices for used vehicles were still down 11%, but the decline was less than two months ago (-13.1%).
Days supply dwindled amid a surge in sales.
The wholesale supply had come down to 26 days in January, 32 days in December and 31 days in January a year ago.
Retail supply on dealer lots decreased from 56 days in December and 50 days in January 2022 to 44 days as retail sales rose 16% from December and 5% from a year earlier, based on vAuto data, a service from Cox Automotive .
Buyers strike ends,
Retail prices for used vehicles fell greatly last year, although they were still very high at year’s end, and it seems that consumers armed with huge pay increases, and seeing a bargain compared to the ridiculous prices a year ago , came to the fore. Their buyers went on strike and started buying old vehicles in large numbers.
Impact on “core” inflation measures.
With inflation rising all around, consumers are used to paying higher prices, but feel good about it because the prices of those high-use vehicles are down from where they were, and consumers feel they have Got a deal? seems like it. And so they are starting to raise prices again with increased demand? seems like it. If I were Powell, I’d be getting the will right now.
The drop in retail prices of used vehicles put major pressure on “core CPI” and “core PCE price index,” the Fed’s benchmark for measuring inflation.
The downward pressure from used vehicles in the pipeline (wholesale) is now coming to an end, and we may even be seeing the first signs of a reversal. This trend will be reflected in the retail prices of used vehicles with a typical lag of a month or two.
If those trends in the wholesale market continue in January and transfer to retail – increasing retail prices of vehicles amid rising demand – they could be on the way to month-to-month “core” inflation measures coming this spring and summer. There is bad news for
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it very much. Click on the Beer & Iced-Tea Mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here,