Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 1.6% month over month in December to a record high of 236.2, a 46.6% increase from a year ago, according to numbers released Jan. 7 from the Manheim Used Vehicle Value Index.

The non-adjusted price change, however, declined 1.1% from November, leaving the unadjusted average price up 43.4% year over year.

“The wholesale auction market began to slow in the final weeks of the year, but prices typically bounce in the spring,” said Cox Automotive chief economist Jonathan Smoke in a news release. “We don’t anticipate 2022 will be an exception, especially with record-level tax refunds expected and ongoing inventory challenges. Unfortunately for consumers, it will be the second half of 2022 before we begin to see normal price depreciation again, barring any further supply chain disruptions. Uncertainty exists around what, if any, impact the Omicron variant will have on supply chain and inventory.”

Manheim Market Report (MMR) values saw weekly price decreases in December that accelerated in the final weeks of the month. MMR is a valuation tool used by tens of thousands of consignors and dealers to assess millions of trade-ins each month. MMR is designed to be highly stable and avoid overreacting to short-term market ups and downs and provides an accurate measure of vehicle valuations regardless of market conditions.

Over the full four weeks of December, the Three-Year-Old Index declined a net 1.7%. Over the month of December, daily MMR Retention, which is the average difference in price relative to current MMR, averaged 98.3%, indicating market prices were below MMR values.

The average daily sales conversion rate also declined in December. At 53%, the conversion rate was close to normal for the final month of the year. The sales conversion rate averaged 52% in December 2019. This indicates that the month saw a balance between buyers and sellers, and as a result, every top-selling vehicle lost value month over month in December on a non-seasonally adjusted basis. However, more appreciation is expected through the spring with strong seasonal demand and robust tax refunds.

On a year-over-year basis, all major market segments saw seasonally adjusted price increases in December. Vans had the largest year-over-year performance, while the pickup, luxury car, and SUV segments lagged the overall market. On a month-over-month basis, no segment saw declines, as compact and luxury vehicles outpaced the market and remaining segments.

High Prices and Inventory Challenges Lead to Slowing Sales

According to Cox Automotive estimates, total used-vehicle sales were down 4% year over year in December. The December used-vehicle seasonally adjusted annual rate (SAAR) of sales was 39.1 million, down from 40.6 million last December and flat compared to November’s revised 39.1 million SAAR. The December used retail SAAR estimate is 20.4 million, down from 21.6 million last year and flat month over month.

In the final weeks of 2021, used-vehicle retail supply moved higher while the average listing price climbed past $27,000 for the first time, according to the Cox Automotive analysis of vAuto Available Inventory data. Normal used retail inventory is about 44 days’ supply. It ended December at 54 days, above normal levels. Wholesale supply was also elevated, ending December at 33 days, above the normal supply of 23.

Rental Risk Mileage Decreases as Prices Rise

The average price for rental risk units sold at auction in December was up 38% year over year. Rental risk prices in December were up 3% compared to November. Average mileage for rental risk units in December (at 69,000 miles) was up 32% compared to a year ago and down 9% month over month.