Used Car Prices Unexpectedly Surge Higher

According to Manheim data the prices of used cars increased unexpectedly for the second consecutive January. This raises concerns about inflationary pressures rising again.

The Manheim Used Vehicle Value IndexThe, which tracks wholesale auction prices of used cars, increased 2.5 percent in January. In December, prices were also up, marking the first month-tomonth gain since May 2022. This gain means that the index is now at its highest level since August 20, 2022. It indicates that prices have recovered from the bulk of the declines in the second half last year.

Manheim’s wholesale index is thought to be a leading indicator for both new car prices and retail used car prices. The Consumer Price Index measured used car prices in months following the drop in the wholesale price index.

Manheim estimates that used retail sales rose 16 percent in January compared to December, and that retail sales were up 5 percentage year-over-year.

The core Consumer Price Index excludes fuel and food prices. Used car prices make up about 4.5 percent. Inflation can be pushed up by rising used car prices. A sharp rise in used vehicle prices was a sign of greater inflation in 2021.
Used-car prices can be used as a gauge of inflation because they are very flexible and adaptable to market conditions. Some prices take longer time to adjust to fluctuations in demand. When inflation is increasing, it may first show up on the used car market.

Even with the January and December price increases, used car prices are still lower than they were one year ago. The Manheim Used Vehicle Value Index fell 12.8 percent in January 2022.

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