#USA #Atlanta #Cox Automotive #Tariffs #Manheim Index

Understanding the March Dynamics of the Used Vehicle Market

March 2025 proved to be a notable month for the wholesale used vehicle market, revealing a mix of positive and negative trends driven largely by the announcement and implementation of new auto tariffs by the government. According to the Manheim Used Vehicle Value Index (MUVVI), wholesale used vehicle prices decreased on a seasonally adjusted basis compared to February, leading to a decline in the index to 202.6. This marks a 0.2% decrease compared to the same time last year while also being lower than February’s figures.

Despite the index drop, an interesting phenomenon occurred: the sheer volume of auction activity increases as dealers and consumers scramble to adapt to the new market conditions. Jeremy Robb, Senior Director of Economic and Industry Insights at Cox Automotive, noted that typically, March is a strong month for wholesale vehicle prices, and this pattern is tied to a seasonal bounce related to tax season. However, this year's price increases did not align with the expected level of appreciation, resulting in overall declining index metrics.

Tariffs and Their Impact

The introduction of 25% tariffs on all imported vehicles introduces a layer of complexity into both new and used vehicle markets. The tariffs are designed to bolster domestic auto production but have begun to disrupt the existing framework of vehicle pricing and sales. As consumers anticipate rising prices, many are urgently shifting their purchasing decisions—favoring used vehicles over new options as they look to sidestep increased costs.

Cox Automotive Chief Economist Jonathan Smoke commented on the situation: "We have officially embarked on a roller coaster ride in the used vehicle market. While March values did see an increase on an unadjusted basis, they fell short of expectations set by previous years. Yet, the tariff announcement stirred dynamics indicating a potential surge in prices in the upcoming weeks."

The current trends suggest that as supply of new vehicles dwindles and prices rise, the used-vehicle market's metrics might improve, thus presenting a differing sales landscape for the foreseeable future.

Inventory Levels and Consumer Demand

Retail inventory for used vehicles found itself at a relatively lower state, measured at 2.15 million units for the month, reflecting a 1.2% decline from 2024 numbers. Following typical seasonal patterns, the used market usually experiences reduced inventory levels due to heightened demand observed in tax season. March retail vehicle sales surged up to 19.4% higher than February's figures, alongside an 8% year-over-year increase.

A further analysis showed that daily sales conversion rates at Manheim exhibited encouraging signs, rising to 65.8%—an increase of six percentage points compared to the previous month, highlighting the urgency and active participation in auction settings.

Segments in the Spotlight

Continuing to dissect market performance on a segmented basis, luxury vehicles notably led the sector, achieving a 1.1% rise compared to last March. SUVs, though slightly underperforming, diminished only by 0.1%, while trucks and compact cars exhibited noticeable declines, falling by 0.9% and 6.1% respectively.

The electric vehicle (EV) market also endured its share of depreciation, marking a 2.3% decline in values against the prior month, as the mix of EV sales surged to new highs, capturing 2.9% of all units sold at Manheim in March.

Future Forecasts and Conclusions

In response to these evolving trends, Cox Automotive foresees revised forecasts. The retail used-vehicle sales in 2025 are expected to reach approximately 20.1 million, demonstrating negligible growth but still reflecting resilience in market demand. With heightened pressures from tariffs impacting both new and used vehicle pricing, a greater appreciation in used values is anticipated for the remainder of the year.

In summary, while March's data indicates a decline in the Manheim Index, it also captures the dynamic shifts as the market grapples with the realities of tariffs, resulting in a paradoxical increase in auction activity. The months ahead are likely to yield further fluctuations as inventory and demand continue to evolve within this increasingly complex buying landscape.