Used Car Prices Drop as Consumers Pull Back on Spending

Used car prices dropped in April, marking the first month-over-month decline seen this year.

The wholesale used vehicle prices declined 3% in April compared to March after having increased 8.6% through the first quarter from December 2022, Manheim reported Friday (May 5).

The decline in used vehicle value accelerated in April as the month progressed, according to the Manheim Market Report (MMR).

There was a year-over-year decline in April, too, continuing an 8-month-long series of such declines, according to the report.

“We’ve experienced eight straight months of year-over-year declines, averaging 8.3%, and it’s likely not over yet,” Chris Frey, senior manager of economic and industry insights for Cox Automotive, which owns Manheim, said in the report. “During the financial crisis, we had 16 months of annualized declines, averaging 5.8%. Though I’m not predicting doom, we’ve surely started a second, and more rapid, decent off the pandemic peak of January 2022.”

The number of used vehicles sold also declined in April, according to the report. Manheim estimated that used-vehicle retail sales declined 8% that month, both month-over-month and year-over-year.

The drop in used car prices, along with rising interest rates, have impacted the sales of new cars as well.

Some dealers said consumers were already hesitant to buy new cars due to high prices and a shortage of affordable cars.

PYMNTS research has found that consumers are purchasing fewer vehicles as they readjust their buying strategy due to inflation.

Fifty-five percent of consumers said they did not purchase a car in 2022 and likely won’t again this year, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Economic Outlook and Sentiment Edition,” a PYMNTS and LendingClub collaboration.

Across categories of products and services, consumer spending has flattened.

The Bureau of Economic Analysis (BEA) said April 28 that personal consumption expenditures in March were unchanged from where they were in February.

Consumers spent more on services like housing, utilities and healthcare, but that was partly offset by their spending less on motor vehicles and parts, gasoline and other energy goods, according to the BEA report.