Used Car Prices Finally Dip in February
As gas prices continue to rise, Americans may start seeing financial relief in at least one area: Used car prices dropped year over year in February, marking the first time that prices on used vehicles declined since Sept. 2020. The Manheim Used Vehicle Value Index dropped 2.2% compared to January. In January, used car prices started to slow their rise, increasing just 1.5% since December.
But used car prices are still up 32.4% year over year. Vehicle prices have had a disproportionate affect on inflation recently. In past decades, the price of used cars’ contribution to inflation averaged zero, CNBC reported. But, recently, it’s been responsible for a 1% annual rise.
White House economic advisor Jared Bernstein, however, said that the impact of used car prices on inflation is “remarkable and revealing.” He told CNBC: “It’s a reminder of how extremely unusual this situation is. The world has not forgotten how to produce new (and thus used) cars and we should expect this series to revert once the underlying supply constraints cease.”
Used vehicle prices dropped in February across all categories, and sales were also down for the month compared to year over year projections. Manheim reported that sales rose by just 3% in 2022, which is lower than usual, and attributed it to slower tax refund processing. The IRS reported that only 17% of all likely tax refunds had been issued by mid-Feb. 2022. In the same week in 2019, pre-pandemic, 38% of tax refunds had already been distributed.
If you’re considering using your tax refund to purchase a more fuel-efficient vehicle to combat rising gas prices, it’s important to remember that both the higher gas prices and higher used car prices are both, most likely, temporary situations. If you’re planning to make the switch to a fuel-efficient vehicle, consider an electric vehicle to avoid the stress of fluctuating gas prices — and to cash in on state and federal tax credits related to your purchase.
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