Used Car Prices Fall Slightly, But Don’t Get Too Excited

• Wholesale used car prices actually went up in January and used inventory issues continue to plague dealerships, with a majority of consumers buying out their leases.
  

• Tensions between banks and dealerships are also boiling over as loan defaults and repossessions rise rapidly, with interest rates continuing to grow and financing incentives disappearing.

• If you can ride it out, experts continue to say inventories are bound to grow, allowing consumers to regain some leverage in the market.
  

For about two years now, the most common refrain in the automotive industry has been that cars are expensive and getting pricier by the day. With choked supply chains, shrunk workforces, and minimal materials to go around, manufacturers have simply had a hard time building new cars, meaning the few available have commanded high prices. So, as consumers continued to want and need reliable, personal transportation, a mass of used car consumers flooded a market that had little to offer them.

At its worst, average used car prices were reported as high as $33,513 in March 2022, with interest rates for used cars reaching an average of 10.57% through January. However, the US Bureau of Labor Statistics has recently seen used car prices beginning to fall, with Consumer Price Index statistics from January showing an 11.6% decline year over year. While this drop is genuinely sharp, the month-over-month decrease has been slight (on average 1.38%), based on data from July 2022 to the present.

Even so, experts say consumers shouldn’t rush out to buy a used car just yet. Analysis from Cox Automotive shows that while used car prices continue to fall slowly, stickers at the wholesale level actually went up 2.5% in January.

Additionally, Chief Economist at Cox Automotive, Jonathan Smoke, said used car supply is actually down, with a one-day drop in supply across dealerships nationwide from December to January and a 13-day supply lull year-over-year. Unfortunately for budding buyers, the lack of supply and increasing wholesale prices are set to curb any slight decrease in used retail prices, as dealerships scramble to keep inventory and end up buying at these higher rates.

“Given the rise of wholesale prices to start the year, it is not likely that CPI will continue to see used prices go down,” Smoke noted.

Astute consumers may wonder how there is a shortage of used cars if dealers aren’t facing the material shortages and supply chain challenges that have hindered new car production. There is no one concise answer, but experts say it’s a cataclysm of industry and worldly factors that trace back to the early pandemic days of 2020.

Diana Lee, an industry veteran with experience running dealerships, consulting for legacy manufacturers, and now creating OEM advertising and outreach plans as CEO and Founder of Constellation, said the ability to buy a used car at a reasonable rate may actually depend on where you live in the country.