Used Car Prices Drop For Fifth Consecutive Month, According to Government Figures
Rising new car inventories and higher interest rates may be finally cooling the used car market.
The latest figures from the US Bureau of Labor Statistics indicate that the used car market may finally be cooling off.
As per numbers from the Bureau's monthly Consumer Price Index Summary, the index for used car and truck prices fell 2.9 percent in November. It marks the fifth consecutive month of decline, which began in July this year. While the decline was initially slow, it has accelerated in recent months, with September and October recording declines of 1.1 percent and 2.4 percent respectively.
Other indicators are suggesting that change is afoot, too. October figures from the Manheim Used Vehicle Index recorded a drop in wholesale used car prices of 2% compared to September. After six straight months of declines, the numbers are down a full 10.3 percent from a year ago. Manheim's numbers indicate retail prices are still up compared to last year overall, but the government's month-by-month figures show they're slowly coming back down to Earth. Retail sales figures tend to lag wholesale figures as a matter of course, with signs positive that a downward trend has been established.
The falling prices are likely due to increasing levels of new car inventory. As reported by Cox Automotive, the supply of new vehicles is slowly starting to recover as automakers are getting past the worst pains of the pandemic chip shortage. Figures indicate dealers are holding an average of 50 days' supply, the highest figure recorded since May 2021. With more new cars on dealer lots, fewer buyers are being pushed into the used market.
Higher interest rates may also be depressing demand, as reported by Forbes. With finance now more expensive, and significant cost-of-living pressures, consumers are naturally more cautious around big expenditures, including new and used cars alike.
The drop in used car prices isn't good news for everyone, though. In particular, used car giant Carvana has found itself stuck between a rock and a hard place. Demand is dropping, as with prices, and it's stuck with plenty of inventory that it bought at the peak of the market.
If you've been holding out on buying a used car because of the torrid nature of the market, it appears that relief may soon be in hand. If trends continue, we might even see an overall correction to pre-pandemic levels. Here's hoping.
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