Used vehicle prices experienced a slight decline in May, following a strong surge in April, as consumers who had been wary of price hikes due to tariffs moved to purchase vehicles. According to Cox Automotive’s Manheim Used Vehicle Value Index, which tracks prices of used cars sold at U.S. wholesale auctions, prices dropped by 1.5% from April to May. Despite this decrease, the market remains 4% higher compared to the same period last year. April’s price levels were the highest since October 2023.
Impact of Tariffs and Market Dynamics
While President Donald Trump’s 25% tariffs on new imported vehicles and parts do not directly affect the used vehicle market, changes in new vehicle prices, production, and demand influence the used car sector. Jeremy Robb, senior director of economic and industry insights at Cox Automotive, noted that wholesale vehicle prices showed remarkable strength in April but softened in May, though prices are still significantly higher than last year. Retail prices, which typically follow wholesale trends, have not dropped as quickly, reflecting the overall strong demand and limited supply.
Strong Demand and Low Inventory
Despite the recent dip, the used vehicle market continues to show strong demand, largely due to low inventory levels. With only 2.2 million used vehicles available, the market remains tight compared to historical norms. The shortage in supply is attributed to factors such as the global pandemic and supply chain disruptions, leading consumers to hold on to their vehicles for longer periods. This trend has kept demand high, even as prices fluctuate.
Retail Sales and Future Outlook
Retail used vehicle sales in May were down 3% compared to April but still saw a 4% increase year-over-year. Cox Automotive previously reported that used vehicle prices have been stabilizing since the volatility of the past few years, with prices calming down in 2024. As the market continues to navigate low inventory and high demand, it is expected that used vehicle prices will remain elevated but more stable moving forward.