Inflation in the wholesale market for used cars accelerated in February, with prices rising for the third consecutive month.
The Manheim Used Vehicle Value Index, which tracks wholesale auction prices for used cars, rose 4.3 percent in February. Prices were up in December, the first month-to-month gain since May of 2022, and rose 2.5 percent in January. The February gain was the largest monthly increase since February of 2009.
Manheim’s wholesale index is thought to be a leading indicator for both new car prices and retail used car prices. The decline in the wholesale index last year anticipated a decline in used car prices measured by the Consumer Price Index months later.
Used-car prices account for about 4.5 percent of the core Consumer Price Index, which excludes food and fuel prices. As a result, rising used car prices can push up the overall measure of inflation. In 2021, a sharp rise in used car prices was a leading indicator of more widespread inflation.
One reason used-car prices are sometimes a leading indicator for inflation is that they are highly flexible and responsive to market conditions. Other prices take longer to adjust to increases or decreases in demand. So when inflation is rising, it can show up first in the used car market.
Despite the increases in the past three months, used car prices remain lower than they were a year ago. The Manheim Used Vehicle Value Index is down 7.0 percent from a year ago, which is much less of a decline than the 12.8 percent annual drop recorded a month earlier.