July inflation report: New and used car prices keep falling

New and used car prices are continuing to drop, according to the latest government inflation data released Wednesday morning. The bottom line? Consumers may soon be buying more cars.

For the month of July, consumer prices for new autos were down 0.1% compared to June (though up 3.5% year over year, with the yearly figure coming down considerably compared to the prior month’s 4.1%). The used car market saw even more moderation, with prices down 1.3% for the month of July alone, and dropping 5.6% year over year. Both of those figures for the used car market fell again for a second month in a row.

Car prices, in particular for used vehicles, seem to be coming down faster compared to inflation in the broader economy, which saw overall CPI rise 3.2% in July year over year, but up 0.2% month over month. That was below analyst expectations of 3.3%, but more than the June’s 3%.

Used vehicle trends are also coming down at the wholesale auction market, which tracks overall trends that are a precursor to what will be seen at the retail level.

Manheim’s Used Vehicle Value Index, which tracks the auction market, finds used vehicle prices fell 1.6% in July, and were down a whopping 11.6% year over year. In fact, Manheim’s data showed July marked the 12th month in a row that the index fell compared to a year ago.

But the story in the used market may not be so simple.

“The July drop of 1.6% is an indicator of slowing wholesale price declines, at least when compared to the month-over-month losses we’ve seen since April,” said Chris Frey, senior manager of economic and industry insights for Cox Automotive.

The used market did see a momentary hike of prices during the spring buying season, which is generally fueled by tax refunds. But it is now back to trending lower, though prices may be moderating at the wholesale level.

The big year-over-year drops in used car prices, while a positive sign for consumers, must again be put into the context of the massive price gains following the pandemic.