Stabilization of Used Vehicle Values Seen in 2024 Amid Market Challenges

Overview of Used Vehicle Market Trends in 2024

The automotive landscape of the used vehicle market has experienced noteworthy fluctuations as we progress into the year 2024. Significantly, the Manheim Used Vehicle Value Index (MUVVI) has noted a year-end increase for the first time since 2021, ending the year at 204.8—a modest rise of 0.4% compared to the previous year. While this uptick is commendable, it falls short of the long-term average growth of approximately 2.3%.

The used vehicle market had a turbulent first half in 2024, with weaker-than-expected price performances leading to concerns among dealers and stakeholders. However, a shift occurred in the second half of the year, indicating a potential stabilization in values, marking the conclusion of an earlier price correction phase.

Factors Influencing Used Vehicle Prices

Cox Automotive's Chief Economist, Jonathan Smoke, noted this transition, describing the performance in the first half as disappointing but praising the stronger second half as crucial for recovery. The prices dropped significantly post the COVID-19 pandemic, reaching a peak of 257.7 at the close of 2021. A gradual decline then ensued, culminating in a dip to 196.1 in June 2024. Post-June, an uptick in values signified growing retail demand coupled with tighter inventories. In fact, the estimated retail sales of used vehicles rose by 4% in 2024, with December witnessing a 13% year-over-year increase in sales, showcasing a positive market trajectory.

December Market Dynamics

Despite the overall year-end positive shift, December presented a mixed picture. For instance, the seasonally adjusted MUVVI indicated a decline in average wholesale prices for December compared to November. Without seasonal adjustments, average prices fell by 0.8%. This presents an insight into the complex market behavior, especially around holiday periods, which traditionally disrupt normal sales dynamics.

Jeremy Robb, Sr. Director of Economic and Industry Insights at Cox Automotive, elaborated on the December trends, affirming that seemingly normal depreciation patterns emerged closer to historical averages, unlike the turbulence experienced in earlier years. Looking ahead, Robb projected a continued normalization of depreciation trends for 2025, provided tight retail supplies and new vehicle tariff uncertainties remain manageable.

The Transition of Electric Vehicle Prices

Amidst the overall landscape, the used electric vehicle (EV) market encountered its unique challenges in 2024. Used EV values depreciated significantly, particularly in the early months, showcasing a stark contrast to the non-EV segment. However, a turning point was noted in the latter half of the year when the used EV index began to stabilize, rising by 9.4% compared to a more modest 4% increase in non-EV prices.

By December, the average wholesale price for used EVs indicated a promising rise of 3.4%, in contrast to a 0.5% fall experienced by non-EVs. The increased demand for used EVs hinted at a potential floor value being established in this segment. The overall volume of EV transactions in wholesale saw a remarkable year-on-year growth of 59% by Q4 of 2024, amplifying the narrative of a budding transition towards electric mobility among consumers.

Forecasts for the Future

Looking ahead to 2025, Cox Automotive forecasts retail used-vehicle sales to reach approximately 20.1 million units, reflecting just a 1.2% increase year-over-year. This slow anticipated growth stems from remaining constraints in supply, a remnant effect from pandemic-induced production limits and a scarcity of lease maturities entering the market.

As we venture into 2025, the used vehicle values are predicted to follow a more stabilized depreciation pattern, projected at a year-over-year increase of 1.4% in December 2025—modestly lower than the typical 2.3%. The overall sentiment leans toward cautious optimism amidst a continuously fluctuating market.

Closing Thoughts

In conclusion, 2024 proves to be a pivotal year for the used vehicle market, indicating recovery signs while still navigating through complex market challenges. As the industry gears up for potential transformation, fueled by evolving consumer preferences and technological advancements in electric vehicles, the forthcoming years may present remarkable changes that could reshape the automotive landscape.

For more detailed insights and real-time updates, visit Cox Automotive's platforms or follow them on social media.