Wholesale used vehicle values increased in the fourth quarter by nearly 2 percent to finish the year slightly higher than last year as consumer demand for used car and trucks remained strong. The Manheim Used Vehicle Value Index, a measure of wholesale prices adjusted for mix, mileage and season, ended the year at 123.9, a 1.8 percent increase from a year ago and 2.1 percent higher than the third quarter, Manheim reported on the release of the Index.

An improving job market and attractive financing helped boost the retail market for new and used vehicles. The strongest demand for used vehicles in the fourth quarter was in the $13,000-$15,000 range, a higher sweet spot than a year ago, according to Manheim. Sales of certified pre-owned vehicles, late-model vehicles still backed by a warranty, also hit record numbers in 2014.

“The used vehicle market finished another solid year,” said Manheim Chief Economist Tom Webb. “Consumers continue to see great value in purchasing used vehicles, even at higher price points. Dealers continue to see used vehicles as an important and profitable part of their business.”

Manheim reported that fourth-quarter wholesale pricing for vehicle segments included:

  • Compact car prices were down 1.1 percent in December, compared to the same period last year, as consumers moved to compact SUVs and mid-sized cars.
  • Midsize cars had been one of the weaker segments during the year but saw values end December 2.2 percent higher than the same period last year.
  • Luxury car values fell 0.4 percent on a year-over-year basis, holding their prices despite an increase in supply from off-lease vehicles.
  • Pick-ups and vans remained the strongest segment with pick-ups up 6.1 percent and vans up 3.1 percent on a year-over-year basis. Often purchased for business use, demand for these vehicles has increased during the year.
  • SUVs and compact SUVs also continued to be a popular segment, up 2.8 percent in December compared to the same period last year. Consumers have been moving to compact and mid-size CUVs, which offer a balance of room and fuel efficiency.

With new car sales volumes expected to plateau, the upcoming year will be critical for the auto industry. As long as automakers keep incentives low for new car sales, used vehicle values should remain stable. An incentive war, however, would lower new car prices and also put pressure on dealers to lower used car prices, according to Manheim.

“The growth rate in the U.S. auto market is expected to slow down and level off in 2015,” Webb said. “The big question is whether automakers will be satisfied with their respective slice of the pie. If they aren’t satisfied and resort to heavy incentives, prices and profits will fall.”