Used Car Prices May Have Peaked – Can You Still Make Good Money Selling Yours?
Used car prices may have finally reached their peak. Prices went up 30% between March and June, according to the consumer price index, as reported by CNN, making it the largest three-month price increase in nearly 70 years. The last notable three-month increase in used car prices was a 12% jump in 1974.
The shocking sticker prices for new and used cars can be attributed to a number of factors, including a semiconductor shortage, shipping delays, the inability of car manufacturers to meet consumer demands and low interest rates. Used car prices reached a record average high of over $25,000 in June 2021, with an average of 68,000 miles on the vehicle, according to Cox Automotive.
Price growth has slowed, going up only 0.2% in July — giving hope that prices are beginning to level off and decline. Another good sign is that wholesale prices for used cars are also moving lower.
“While new-vehicle inventory continues to drop, the used-vehicle market is showing small signs of improvement, with slower sales allowing inventories to creep upward,” said Charlie Chesbrough, senior economist, Cox Automotive. “With wholesale prices of used vehicles beginning to retreat from record highs, the worst of the supply crunch in the used market may be behind us.”
However, consumers may not be paying lower prices right away. According to CNN, car dealers have depended less on wholesalers and instead have bought cars directly from owners. Those cars were purchased five to six weeks ago, which will prevent prices from dropping right away. In addition, there is still a question of how much demand there will be when offices reopen and whether new car production can keep up.
“In a situation where there is still lot of demand, I think used retail prices have the potential to hold up better than wholesale,” David Paris, senior manager of market insight for JD Power, told CNN.
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Fortunately, used car prices do have a ceiling and can only go so high before reaching new car price levels, Jessica Caldwell, executive director of insights with Edmunds, told CNN. This means that people shopping for cars may instead opt for new vehicles, cooling the demand for used cars and hopefully the prices soon follow.
“It comes to the point where it just doesn’t make sense to buy used,” she said. “We don’t expect the prices to correct and go back to 2019 levels, but we expect them to become more normal and cool off in the second half of the year.”
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