A salesperson walks past used Toyota vehicles at the Brent Brown Toyota dealership in Orem, Utah on Monday, April 6, 2020.
George Frey | Bloomberg via Getty Images
DETROIT — Used vehicle prices are expected to fall further this year amid rising interest rates and improved availability of new cars and trucks, according to Cox Automotive.
The auto data firm expects wholesale prices from its Manheim Used Vehicle Value Index, which tracks the prices of used vehicles sold at its U.S. wholesale auctions, end the year down 4.3% compared to December 2022.
“New supply remains tight, but it’s improving rapidly. As new supply improves, demand for us is declining,” Cox Automotive chief economist Jonathan Smoke said Monday.
The decline is expected to follow a huge 14.9% drop last year due to price inflation during the coronavirus pandemic, as the availability of new vehicles hit record highs due to chain issues. supplies and parts that have interrupted vehicle production.
The rate cut is welcome news for the Biden administration, which a year ago blamed much of the country’s rising inflation rates on the used-vehicle market.
However, they are still not enough to offset the 88% rise in index prices from April 2020 to January 2022, according to Chris Frey, senior director of economic and industry information at Cox Automotive. For several months during this period, the index saw significant year-over-year increases of between 15% and 54%.
Frey expects the index to ease at least in the first quarter of this year before some seasonal increases, but overall less volatility than in recent years. The Manheim Used Vehicle Value Index rose less than 1% from November to December.
“We don’t expect any major monthly declines to rival the increases on the leads, although there may be difficulties from time to time,” Frey said, adding that the company is monitoring the impact closely. of rising interest rates on car buyers.
Frey pointed out that it’s an economic “good sign” that prices are falling, making vehicles more affordable despite interest rate increases.
Retail prices for consumers traditionally follow changes in wholesale prices. It’s a win for potential car buyers, but not a great one for dealers who have been buying vehicles at record highs and are now trying to sell them for a profit.
So far, retail prices have not fallen as quickly as wholesale prices as dealers try to maintain record prices. According to the most recent data, Cox reports that the average listing price for a used vehicle was $27,156 through November, down just 2% from a year earlier, but the most low since last spring.
Cox estimates second-hand retail sales were down 7% from November to December and 10% from a year earlier for the second month in a row.