Wholesale used car prices rose to an all-time high in September as inventories at dealerships remain at historically low levels, given the strong demand for vehicles coupled with ongoing supply chain challenges. 

The Manheim U.S. Used Vehicle Value Index increased 5.3% month-over-month in September, the most significant monthly rise since April. From a year ago, the index is up a whopping 27.1% to 204.8.

According to the Manheim report, surging used car prices have primarily been a function of global supply chain woes impacting new vehicle production, forcing consumers to buy on the second-hand market. Used car prices are expected to remain elevated through year-end. 

In a separate report, Goldman Sachs told clients that inventories at dealers continued to fall from already historically low levels, and it will take time for inventory at dealers to return to normalized levels given the strong demand for vehicles coupled with continuing supply chain challenges (particularly with semiconductor chip shortages, but also due to shipping constraints on either side of the Pacific).

Dealerships have been forced to purchase second-hand cars to replenish inventory due to shortages of new vehicles. This in itself will also keep used car prices higher. 

Incidentally, new car prices are also increasing and will likely continue as automakers said production of new vehicles this fall/winter would continue to be constrained by a chip shortage and the spread of COVID-19 in Southeast Asia. 

This year, used-car prices have contributed to U.S. inflation, responsible for approximately 2% of overall consumer prices. The latest data from Manheim is not a win for "team transitory."