In the News

Why Used Vehicle Values Will Not Crash

February 9, 2022

Recently, the quarterly Manheim Used Vehicle Value Index call was held to review market performance from the end of 2021 and the market view going into 2022.

A key topic of discussion: Has the significant increase in used vehicle prices set the market up for a crash in 2022?

The run-up of used vehicle prices towards the end of last year was obviously concerning, and many thought a market crash would be inevitable in 2022. The consensus from this call though was that the fundamentals of the current market do not support that theory. They posted instead that used-vehicle prices are not substantially out of alignment with new vehicle prices. They expect used vehicles to depreciate in 2022, and new vehicles to continue seeing above-average inflation. With these two changes, they predict by year-end that the relationship between new and used vehicles will be back within historical norms. They concluded that, barring an economic catastrophe, used-vehicle values will continue to be strong and above pre-pandemic levels.

·     Historically, a decline of more than 10% in used-vehicle prices is rare—much less the hyped 20-30% from a well-publicized report.

·     The sources of wholesale vehicles are constrained at least through 2023, and new-vehicle supply is likely to be constrained through at least 2022.

·     There is a pent-up demand as a result of the ongoing lack of supply.

·     Auto credit does not face a growing negative equity problem.

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Disclaimer: In the News blog posts are Doering's take on the best content and the latest news in the Fleet Management Industry. Doering did not write the original source article.