The latest monthly Manheim Used Vehicle Value Index shows pricing has fallen for 11 consecutive months.
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Used-car prices are falling. That’s good for car buyers. For car makers, the data isn’t as positive.
The widely followed Manheim Used Vehicle Value Index is released on the fifth business day of each month. It tracks wholesale used-vehicle pricing. The reading for July came in at 211.7, down 11.6% year over year.
Pricing has now fallen for 11 consecutive months. In six of the 11, prices have fallen by double-digit percentages. Prices, however, are still up about 38% from the end of 2019, before Covid-19. The pandemic restricted auto production, leading to a lower supply of cars and higher prices.
Starting in July 2020, the Manheim Index rose by double-digit percentages for 22 consecutive months.
“We’re now back to the same index value last seen in April 2021,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive, in a news release. Cox owns Manheim. “Used retail inventory continues to rebuild; but with used retail sales also showing some summer strength, we do not foresee wholesale price declines of serious import through December.”
The data are a mixed bag for auto stocks. Lower used-car prices pressure new-car prices which is a headwind for
General Motors
(GM),
Ford Motor
(F), and
Stellantis
(STLA). But stable pricing through December isn’t bad news.
The average transaction price for a new car in the U.S. is about $49,000, according to Kelly Blue Book. The average used-car price is about $27,000. At the end of 2019, before the pandemic, those numbers were roughly $39,000 and about $20,000, respectively.
Ford stock is down 0.3% in Monday trading, while Stellantis and GM shares are up 0.7% and 0.8%, respectively. The
S&P 500
is up 0.7%, and the
Dow Jones Industrial Average
has added about 1.1%.
Some pricing fears are already reflected in share prices. GM and Ford shares are down about 7% and 14%, respectively, over the past month. Stellantis shares are up about 10%, buoyed by strong earnings. The S&P 500 is up about 3% over the same span.
Stellantis stock is also the cheapest of the group, trading for about 3.5 times estimated 2024 earnings. Ford and GM shares trade for 6.8 times and 5.4 times, respectively.
Some auto-parts stocks are moving on Monday. Lower prices can mean higher sales volumes for new and used cars. Americans have been buying cars at an annual rate of roughly 15 million units in recent months. Before pandemic that number was about 17 million. More units means more parts for suppliers.
Lear
(LEA) and
Gentex
(GNTX) shares are both up about 1.7%.
Falling prices might be good for volumes, but they can also lead to buyers waiting for a better deal. Why buy now when prices will be lower in a month?
Write to Al Root at allen.root@dowjones.com
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