Historical Index

Index Computation

The Index is based on all completed sales transactions at Manheim’s U.S. auctions (A useable sample size of over five million transactions annually). The first step is to break down the sales data into 20 separate vehicle market classes (e.g. premium compact, large SUV, etc.), according to the J.D. Power and Associates classification scheme. Then, through correlation analysis, strip away any of the movement in price that was caused by mileage alone for each of the 20 market classes. The averages for the 20 market classes are then weighted to reflect an unchanging mix of units sold. The final step is to seasonally adjust the time series (Census X-11 methodology is used).

Historical Analysis

Five major movements in the Manheim Index have been observed since its starting point in January of 1995. This is our interpretation of what caused those movements:

  • Tight supplies and rising demand push used vehicle prices higher (5/95 – 5/96). Weak new vehicle sales from 1990 to 1992 sharply reduced the number of used units coming back to market. Used vehicle prices were also boosted by the increased demand that flowed from a growing economy and favorable credit conditions. Short-term interest rates fell almost continuously through this period, and used vehicle credit became more plentiful due to aggressive growth in sub-prime lending.

  • Higher used vehicle supply and new vehicle incentives keep used vehicle prices flat (5/96 – 12/97).

  • Favorable credit conditions push used vehicle prices higher (12/97 – 2/99). This period was characterized by both lower interest rates and increased credit availability. In addition, earlier price increases in the new vehicle marketplace (they had been strong 3 to 4 years prior) were now transferring themselves over to the used vehicle market.

  • Soaring used vehicle supply keeps used vehicle prices flat (2/99 – 2/01). An unprecedented long period of high new vehicle sales boosted the available supply of used units. New vehicle sales incentives were also a factor, as they rose substantially beginning in the summer of 2000. A very strong economy offset both of these factors to some degree.

  • Weak economy plus 9/11 pushes used vehicle prices lower(2/01 to 10/01). Labor market conditions closely tied to used vehicle demand (overtime, jobless claims, and total employment levels) weakened in 2001 even prior to the terrorist attacks of 9/11.