Used vehicle prices are falling but not enough to offset record highs

A salesman walks past a used Toyota vehicle at a Brent Brown Toyota dealership in Orem, Utah, Monday, April 6, 2020.

George Frey | Bloomberg via Getty Images

DETROIT — Used car prices are expected to fall further this year due to rising interest rates and increased availability of new cars and trucks, according to Cox Automotive.

The Mannheim Used Car Value Index, which tracks the price of used cars sold at US wholesale auctions, expects wholesale prices to fall 4.3% from December 2022, an automotive data company expects.

“The supply of new vehicles remains tight, but is improving rapidly,” Cox Automotive chief economist Jonathan Smoke said on Monday.

The decline is expected to follow last year’s massive 14.9% drop due to price spikes caused by the coronavirus pandemic. Supply his chain and parts problems halted production of the vehicle, as new vehicle availability reached record lows.

Lower interest rates are good news for the Biden administration. A year ago, the Biden administration blamed much of the domestic inflation on the used-car market.

But it’s still not enough to offset the 88% rise in index prices from April 2020 to January 2022, according to Chris Frey, senior manager of economic and industry insights at Cox Automotive. . In various months of that period, the index experienced significant year-on-year increases, from 15% he to 54%.

Frey expects the index to soften until at least the first quarter of this year before a seasonal rally, but overall he expects lower volatility than in recent years. Mannheim’s used car price index rose less than 1% from November to December.

“There may be some occasional severe sleds, but I don’t think the massive monthly decline will match the uphill slope,” said Frey, who is closely watching the impact of rising interest rates on car buyers. added.

Frey stressed that falling prices are a “good sign” economically, making vehicles more affordable despite rising interest rates.

Consumer retail prices traditionally follow changes in wholesale prices. This is a boon for potential car buyers, but not for dealers who bought cars at record prices and are now trying to sell them at a profit.

So far, retail prices have not fallen as quickly as wholesale prices as dealers try to keep them at record highs. According to the latest data, Cox reports that the average used car price was $27,156 by November, down just 2% from the year before, but the highest since last spring. It was of low standard.

Cox estimates that used car retail sales fell 7% from November to December, the second consecutive month of 10% year-over-year declines.

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