Wholesale Used Car Prices in Freefall While Retail Prices Keep Rising
Used car prices are plummeting, but not for the consumer. Wholesale prices are way down while retail prices at dealers remain astronomical. This could signal the beginning of the end of the inflated modern car market.
The pain of the pandemic car market is familiar to any of us who wanted a car in the last two years, saw the prices, and duly gave up on the search. Everything, not just enthusiast machinery, is insanely valuable and impossible to buy at any sort of reasonable price. There is a bit of good news, however: wholesale used car prices are dropping like bricks in water.
But there is a bit of bad news related to it that should temper our short-term expectations. Sure, wholesale prices are seriously down but retail prices are as unhinged as ever before. In a report by The Hill, retail prices are up 7.2% from last year, yet wholesale prices are down 10% in the same period.
There are a couple of takeaways from this. The glass-half-empty view is that dealers are raking in more profit than ever before, but the flip side of this means that we’re due for a correction in the medium term. Wholesale prices are a great indicator of the true value of a car because it is the bottom-dollar value. Most folks don’t have access to wholesale prices from auctions, so there is still challenges between consumers and their ability to access lower car prices.
And the truth is that dealers will try to keep car prices high for as long as possible. While the gross revenue might be lower, dealers have never been more profitable per unit. Eventually, the wholesale price will influence retail price, but we likely won’t see the change until there’s more inventory on dealer lots.
So, the news is positive. But it isn’t changing just yet. Many dominos still need to fall for this car market to even out, but it’s looking like they’ll topple sooner rather than later.
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