Wholesale Used Car Prices Fall While Retail Prices Remain Elevated

Chris Teague
by Chris Teague
wholesale used car prices fall while retail prices remain elevated

A couple of months ago, we reported on the decline of wholesale used car prices but cautioned you not to get too excited about getting a killer deal on your next purchase. Now, The Hill has more news on the subject, and, unfortunately, it’s not all that great for car buyers.


The Hill reported that the “wholesale price of used cars is falling off a cliff while the retail prices that car shoppers are paying are way up.” As it rightly points out, this seems to indicate that dealers are making more money while buyers are still paying through the nose.


The Manheim Index showed a 2 percent decline in used car prices between September and October and a 10.3 percent decline over the last year. Luxury vehicles and pickup trucks saw larger than average declines of 12.3 and 8.4 percent, respectively.


At the same time, retail prices for used cars have climbed 7.2 percent since last year, meaning dealers are keeping the extra profit and may be egging on inflation in the used car markets. Claudia Sahm, a former Fed banker, told The Hill that inflation is driven by prices set by businesses, not by some overarching authority on pricing. Unfortunately, if companies want to charge more, that’s the price consumers will see. 


The bright spot in this report is that the distance between wholesale and retail pricing could shrink as dealers start to sell some of their overpaid-for inventory. There’s typically a lag time while dealers’ selling prices adjust to new wholesale prices, as they’ve paid more for cars that are now selling for less and need time to move the inventory.


Inventories are still short nationwide, which will prevent a major collapse in prices on both the wholesale and retail sides of the house. Prices are expected to remain higher than usual for some time, so it could be a year or more before things stabilize.

 [Image: cleanfotos via Shutterstock]

Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by subscribing to our newsletter.

Comments
Join the conversation
3 of 17 comments
  • IH_Fever EV charger on a GM lot, probably with a Cummins generator to keep them running. A regular melting pot haha
  • Tassos Wake me up when VW (or any other loser "Legacy" automaker comes up with a "BETTER TESLA" BEV AT THE SAME PRICE. SO far, VW has FAILED MISERABLY AND LOST BILLIONS DOING IT. Its models are way underwhelming and inferior, and cost not much less than the model 3. ANd DESPITE the SCANDALOUS $7,500 tax credit, which is an INVERSE ROBIN HOOD, takes from the average household and gives it to the average BEV buying family, which has an income of $170k+, VW STILL FAILED.ALso notice the so-called "Mobility Officers" at FORD AND Renault QUIT. another HUGE SCAM, Autonomous Vehicles, they wasted 100s of billions (all idiot legacy makers together) and predicted billions of profits, but so far they DROWN IN A SEA OF RED INK with NOTHING to show for it. Morons will be morons, and the ones in this forum will cheer for their failures "AWESOME, WV, Indeed"! LOL!!!
  • Jwee More range and faster charging cannot be good news for the heavily indebted and distracted Musk.Tesla China is discounting their cars. Apart from the Model 3, no one is much buying Tesla's here in Europe. Other groups have already passed Tesla in Europe, where it was once dominant.Among manufacturers, 2021 EV sales:VW Group 25%, Stellantis at 14.5%,Tesla at 13.9%Hyundai-Kia at 11.2% Renault Group at 10.3%. Just 2 years ago, Tesla had a commanding 31.1% share of the European EV marketOuch. https://carsalesbase.com/european-sales-2021-ev/@lou_BC, carsalebase.com changed their data, so this is slightly different than last time I posted this, but same idea.
  • Varezhka Given how long the Mitsubishi USA has been in red, that's a hard one. I mean, this company has been losing money in all regions *except* SE Asia and Oceania ever since they lost the commercial division to Daimler.I think the only reason we still have the brand is A) Mitsubishi conglomerate's pride won't allow it B) US still a source of large volume for the company, even if they lose money on each one and C) it cost too much money to pull out and no one wants to take responsibility. If I was the head of Mitsubishi's North American operation and retreat was not an option, I think my best bet would be to reduce overhead by replacing all the cars with rebadged Nissans built in Tennessee and Mexico.As much as I'd like to see the return of Triton, Pajero Sport (Montero Sport to you and me), and Delica I'm sure that's more nostalgia and grass is greener thing than anything else.
  • Varezhka If there's one (small) downside to the dealer not being allowed to sell above MSRP, it's that now we get a lot of people signing up for the car with zero intention of keeping the car they bought. We end up with a lot of "lightly used" examples on sale for a huge mark-up, including those self-purchased by the dealerships themselves. I'm sure this is what we'll end up seeing with GR Corolla in Japan as well.This is also why the Land Cruiser has a 4 year waitlist in Japan (36K USD starting MSRP -> buy and immediately flip for 10, 20K more -> profit) I'm not sure if there's a good solution for this apart from setting the MSRP higher to match what the market allows, though this lottery system is probably as close as we can get.
Next