Is the US Used Vehicle Market Defying What Experts Predicted for 2026?

1. Current Market Size and Volume: A Post-Pandemic Assessment

Defining the market: The US used vehicle market encompasses dealer retail, wholesale/auction volumes, and private-party transactions. While new-vehicle retail sales average in the mid-teens of millions annually, total used-vehicle transactions in a typical pre-pandemic year were in the mid-to-high 30 million range when combining dealer and private-party activity. Since 2020 the market’s value has been highly volatile: average transaction prices surged during 2020–2021 as constrained new-vehicle supply pushed buyers into the used market, then corrected as production and inventory recovered.

Baseline metrics from Cox Automotive/Manheim and aggregated industry sources provide the framework for quantification. Manheim’s wholesale data and the MUVVI capture auction values and price trends that form a wholesale-to-retail bridge; Statista and industry reports provide broader counts and share breakdowns. Using these inputs, stakeholders should track three core baseline metrics: (1) annual transaction volume (dealer retail + private party), (2) average transaction price (retail and wholesale), and (3) total market valuation (aggregate spend across channels). Together these show whether normalization is driven primarily by volume reversion (more cars changing hands at lower prices) or by price adjustments (similar volume but lower average prices).

Post-pandemic context: From 2019 to the pandemic peak period of 2021–2022, average used-vehicle transaction prices rose by roughly a third to over 40% in many segments, with stronger dislocations in late-model SUVs and trucks. That spike reflected constrained new-vehicle inventory (semiconductor shortages) and record-low lease returns. By 2023–2024 the market began correcting as new-vehicle production normalized and a wave of lease returns increased supply. Volume trends have diverged by channel: wholesale auction volumes expanded as fleet and OEM remarketing re-entered the market, while private-party transactions remained relatively stable but price-sensitive.

Segment and channel breakdown: Transaction composition matters. Trucks and SUVs retained outsized share of value due to higher average prices and sustained consumer preference, while compact economy cars saw faster price normalization. Certified pre-owned (CPO) and late-model used vehicles held premiums, especially for high-demand brands. Dealers’ wholesale purchases and auction throughput are a leading indicator: rising auction volumes often presage retail price softening as inventory pipelines refill.

Practical baseline: For most commercial stakeholders, a practical near-term baseline is to monitor: monthly MUVVI for price direction; auction volumes and days’ supply for supply pressure; and retail transaction counts and average retail prices for demand resilience. These metrics, taken together, quantify where the market sits relative to the pre-2020 baseline and guide inventory and pricing strategy.

2. Regional Patterns and Geographic Variations in Demand

Overview: Demand for used vehicles in the United States is uneven across regions and metropolitan areas. Geographic patterns reflect climate, household income, vehicle utilization norms, local regulatory regimes, and regional supply chains. Manheim market reports and dealer-level transaction data show a recurring pattern: the Sun Belt and fast-growing metropolitan corridors are often tighter markets with higher retail premiums, while parts of the industrial Midwest and declining population centers show softer pricing and higher supply/days’ supply.

Regional hotspots and softer markets: High-demand pockets include major Sun Belt metros and fast-growing suburban markets where population inflows, lower taxes, and lifestyle preferences sustain demand for trucks, SUVs and later-model crossovers. Conversely, markets with slower employment growth or population declines (some Rust Belt cities and rural counties) often show supply slack and lower price resiliency. Coastal metro areas with strong EV adoption and higher incomes show stronger demand for late-model EVs and CPO electrified models, while inland metro and rural markets continue to favor trucks and traditional internal-combustion SUVs.

Urban vs. rural and vehicle-type divergence: Urban areas demonstrate higher turnover in compact and luxury segments, driven by ride-hailing, fleet cycles and younger demographics who trade vehicles more frequently. Rural and exurban buyers prioritize utility and durability—pickup trucks and body-on-frame SUVs command a greater share of valuations in those regions. This results in regional price differentials: the same model and trim can carry a material premium in a high-demand Sun Belt metro versus a soft Rust Belt market.

Drivers of geographic variation:

- Climate and infrastructure: Snowbelt regions maintain demand for AWD/4WD vehicles; warm-climate regions emphasize open-bed trucks and crossovers.

- Local economics: Unemployment, wage growth, and housing affordability influence affordability and used-vehicle purchasing power.

- EV and tech adoption: High-income coastal metros show earlier EV penetration, changing the used inventory mix and resale dynamics.

Implications for market participants: Dealers and remarketers must adopt a geo-aware sourcing and pricing strategy—shuttling inventory between high-supply and high-demand markets, and using regional premiums to optimize margin. Investors and fleet operators should regionalize assumptions for residual value forecasting and remarketing windows. For consumers, understanding regional differences can unlock savings by expanding search geography when possible.

3. Short-term Price Trends and Market Dynamics: MUVVI/Manheim Index Analysis

MUVVI as a near-real-time barometer: The Manheim Used Vehicle Value Index (MUVVI) remains the industry-standard high-frequency indicator of wholesale used-vehicle price trends. The index captures auction-based wholesale values and, when paired with transaction-level retail data, highlights the wholesale-to-retail translation of price moves. Since the pandemic peak, MUVVI rose sharply in 2020–2021 and began a multiyear correction in 2022–2024; monthly volatility persisted, reflecting seasonality, pent-up demand releases, and macro shocks.

Recent correction dynamics: The correction that began post-2021 has three observable phases: (1) initial sharp pullback as new production improved and supply increases reached auctions, (2) a period of volatility tied to macro shocks (higher interest rates undermining affordability) and (3) stabilization where indices trend toward pre-pandemic baselines but at new equilibrium levels for certain segments. Different vehicle cohorts behaved distinctly: late-model luxury and high-mileage used cars experienced softer demand at the top price tiers, while value-oriented, lower-cost used vehicles found more stable demand.

Inventory and conversion metrics: Days’ supply and wholesale-to-retail spreads are important complementary indicators. As dealers’ days’ supply rose from historically low levels, pressure on margins increased and wholesale-to-retail spreads narrowed. Auction conversion rates (the percentage of vehicles sold vs. offered) recovered to healthier levels, indicating better price discovery and improving liquidity in wholesale channels. Still, inventory composition matters: an influx of lease returns or off-lease 2020–2022 vintages can temporarily depress wholesale prices for specific model years.

Seasonality and event-driven moves: Used-vehicle prices remain seasonal—spring and summer often show stronger retail demand (higher conversion rates), while winter months see softer retailing and greater dealer-to-dealer movement. Event-driven influences (e.g., changes in federal interest rate expectations, major OEM incentives, or sudden supply chain disruptions) can produce short-lived shocks in the MUVVI and corresponding retail pricing.

Practical monitoring and decision rules:

- Use MUVVI monthly trends to set wholesale acquisition thresholds.

- Monitor days’ supply at the local and national level to time retail promotions and discounting.

- Use wholesale-to-retail spread analysis to determine when to convert auction buys into retail offerings or when to wholesale down to avoid prolonged holding costs.

The net effect: MUVVI-led price signals, when combined with inventory and conversion metrics, allow dealers and investors to read market momentum and calibrate buying intensity and pricing cadence.

4. Macroeconomic Drivers: Interest Rates, New-Vehicle Supply, and Semiconductor Impacts

Interest rates and credit affordability: The Federal Reserve’s tightening since 2022 has had a direct impact on monthly payments and credit availability. Rising benchmark rates translate to higher APRs on auto loans, compressing affordability—particularly for subprime borrowers—and increasing sensitivity to term length. Higher financing costs can suppress retail used-vehicle demand or push buyers toward longer terms, which in turn increases risk for lenders and affects residual value assumptions.

Lease returns and the credit channel: Elevated new-vehicle transaction pricing during the pandemic reduced return volumes from the mid-2020 lease cohort; as those leases matured in 2023–2024, a wave of late-model, low-mileage lease returns flowed into the wholesale market, increasing late-model supply and exerting downward pressure on prices for specific vintages. Lease-return timing and volume remain key to forecasting near-term supply pressure.

New-vehicle supply recovery: Semiconductor shortages were the single largest operational shock to new-vehicle production in 2020–2022. As semiconductor production and supply-chain realignment improved in 2023–2024, OEM inventories recovered, reducing the incentive for buyers to accept inflated used-vehicle premiums. The more durable recovery in new-vehicle inventory is a moderating force for used prices, because when new-vehicle discounts and dealer incentives reappear, price-sensitive consumers often prefer new purchases or late-model certified pre-owned options.

Interconnected effects and feedback loops: These macro drivers do not act in isolation. Higher interest rates reduce both new and used affordability, while increased new-vehicle supply raises trade-in flows and wholesale volumes—together these dynamics accelerate used-price normalization. Conversely, a secondary semiconductor disruption or a sudden macroeconomic downturn could tighten supply or sharply depress demand, producing asymmetric impacts across segments and regions.

Policy and financing innovations: New credit products, floorplan financing dynamics, and OEM incentive strategies (e.g., loyalty or subsidized APRs) will shape the pace of normalization. For example, targeted OEM incentives on new vehicles can pull marginal buyers away from the used market, while captive finance promotions can cushion the affordability hit of higher rates and indirectly stabilize used-vehicle demand.

Implication summary: Stakeholders must build scenario-based stress tests around rate paths and production restoration timelines. Conservative planning assumes continued rate pressure into early 2025 with incremental new-vehicle inventory normalization; optimistic scenarios assume faster semiconductor-led production gains. Both scenarios require active management of financing terms, remarketing cadence, and risk-adjusted inventory acquisition.

5. Near-term Market Outlook and Projections Through 2026

Scenario framework: Forecasting used-vehicle prices and volumes through 2026 requires scenario-based thinking given macro uncertainty. Three plausible scenarios frame the outlook:

- Base case (moderate normalization): New-vehicle production continues normalizing, interest rates hold near current levels before easing modestly in 2025–2026, and wholesale supply stabilizes. Under this scenario, nationwide used-vehicle prices finish their correction by late 2024 to mid-2025 and then trend mildly down or flat through 2026 as volumes recover to pre-pandemic norms. Economy and compact segments normalize faster; trucks/SUVs retain some relative strength.

- Optimistic case (faster supply recovery, easing rates): A faster semiconductor-led production ramp and measurable easing of monetary policy in 2025 leads to quicker price stabilization and modest appreciation in select late-model segments driven by strong consumer demand. Dealers benefit from higher margins on select trade-ins and improved auction liquidity.

- Pessimistic case (macro slowdown or supply shock): A sharp macro slowdown or renewed supply-chain disruption reduces retail demand and increases distressed wholesale selling, extending the price correction into 2026 and widening regional dispersion.

Quantitative expectations (relative, not absolute): Across most plausible outcomes, expect:

- Continued convergence of wholesale and retail prices toward new equilibria; price declines of mid-single-digits to low-double-digit percentages from pandemic peaks in many segments are plausible if new-vehicle supply remains healthy.

- Segment dispersion: economy and compact cars likely recover first; luxury and EV segments remain dependent on residual demand and incentives.

- Regional variance: high-growth Sun Belt metros may experience smaller corrections due to continued demand, while slower-growth areas could see extended softness.

Strategic recommendations:

- Dealers: Adopt dynamic inventory strategies—leaner inventories where days’ supply is rising, and use geographic arbitrage to move units to higher-premium markets. Tighten acquisition underwriting and adjust reconditioning budgets to reflect expected selling windows.

- Investors and fleet operators: Stress-test residual value assumptions across the lease portfolio, extend remarketing horizons for at-risk vintages, and use staggered disposal strategies to avoid flooding auctions.

- Consumers: For value-seeking buyers, the window for favorable used-vehicle deals is present when inventory increases—prioritize certified pre-owned late-model vehicles for warranty coverage and seek financing terms that limit payment sensitivity to rising rates.

Outlook summary: By 2026 the market is likely to reach a more stable equilibrium where pricing aligns more closely with structural demand and supply fundamentals rather than pandemic-driven distortion. The pace and shape of that adjustment will vary by segment and region, and active market monitoring—anchored on MUVVI, auction volumes, days’ supply, and macroeconomic indicators—will be the most practical approach for adapting strategy and capital allocation.