AUSTRALIAN wholesale used car prices are continuing to surge in the face of ongoing new-car supply constraints with the Manheim Used Vehicle Value index continuing to see records broken month after month this year.

The index is now sitting at 158.1 off the base year of 2006 with wholesale prices of used cars in Australia up 63.4 per cent year-on-year – another record.

A similar pattern has emerged in the United States where the Federal Reserve has found that surging used-car prices are having a direct effect on the country’s inflation rate, where a 7.3 per cent month-over-month jump in used-vehicle prices in May accounted for one-third of the total increase in core inflation. Used-vehicle prices surged a further 10 per cent in April.

The latest US wholesale used car index published by Manheim, the largest used-car auction business in the US, showed that prices increased by 48 per cent over the past 12 months and that used pick-ups are in such demand that prices of these top-selling vehicles have jumped by a remarkable 70 per cent in a year.

Some Americans say they are now able to sell cars bought a year or two ago at a profit.

Like Australia, the US is experiencing realigned spending priorities surrounding the COVID-19 pandemic that has led people to now include the purchase of an updated car on their family shopping list.

In the US spending stimulus initiatives are also putting more money in many people’s pockets.

Another factor is that car rental operators, which are normally big suppliers of used vehicles to the market, are now buyers as they restock their rental fleets that were sold off to raise cash during the early days of the pandemic.

But, William Nash, the boss of CarMax, the biggest used car operation in the US, is sounding a warning that a correction to used car values is on the cards.

CarMax retails and wholesales about 1.3 million vehicles a year from 220 locations in North America.

Mr Nash said during CarMax’s recent first-quarter earnings call that soaring used vehicle prices are set for a correction. When used car prices are “bumping up against new car prices, I think we are getting close to that inflection point,” he said.

Meanwhile the record prices are not hurting the bottom line.

CarMax reported record profits and revenue in its fiscal first quarter with sales up 138 per cent on the same quarter last year to $US7.7 billion and net earnings up 65 per cent.

By John Mellor