It’s no news to anyone who has been looking for a used car in the last couple of years that the used car market is one of the many things that was wildly affected by Covid-19. Between all of the supply chain issues and higher demand, used car prices have been extremely elevated. But we’re finally seeing some relief.
From December 2019 to October 2022, the U.S. Bureau of Labor Statistics showed that used car prices have risen by 42%. However, there seems to be a light at the end of the tunnel for buyers.
When we last looked at the used car market, industry insiders speculated that elevated prices may persist into the fourth quarter and year-end. Used car prices are still high, but they are finally coming off those highs.
Increased interest rates and obvious concerns about the economy haven’t gone unnoticed in the auto market. In other words, higher financing costs and concerns about the economy seem to be weighing on consumer sentiment. Additionally, easing supply chain pressures are helping rebalance supply.
When demand comes down and supply goes up, consumers can see used car prices realign to more normal levels. So how are prices looking now?
Breaking Down Used Car Prices
As reported by Axios, “wholesale used-vehicle prices — what a dealer pays at auction — fell 4% in August… ‘The number came down like a rock this month,’” according to Chris Frey, an analyst for Cox Automotive.
Like inflation, we’re beginning to see pricing pressure ease significantly.
According to Business Wire: “Used electric vehicle prices declined by 4% from July to August, to an average of $64,306, while used hybrid prices fell by 3%, to $47,790.”
Further, “Average used SUV prices — now $43,222 — have fallen for the past six months, while used pickup truck prices — now $41,469 — have seen month-over-month declines for the past four months.”
However, both used SUV and truck prices are above normal. To be clear, we’re not back to what one would consider “low prices” or even to what the industry refers to as “projected normal” levels or prices. However, we’re seeing a multi-month easing in prices and that could bode well for buyers later this year and into early next year.
Lastly, while prices may remain under pressure, the decline could be a slow one.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
