Although used car prices are still stubbornly high and inventories historically low, things have improved so far in 2023. “The last several months have followed very closely to 2019’s levels, the last normal year we’ve seen,” said Chris Frey, senior manager of Economic and Industry Insights at Cox Automotive.
The average used car buyer paid $27,147 in June year-over-year, according to Kelley Blue Book (KBB), and as Manheim noted, used car prices were down 6% in June while wholesale used-vehicle prices decreased 1.0% from June in the first 15 days of July.
According to Cox Automotive Chief Economist Jonathan Smoke, recent trends are part of a larger move away from the volatility of the pandemic era, when a convergence of factors caused prices to surge dramatically, including supply, demand, loan rates and incomes.
“Used-vehicle prices should see even greater declines over the next three months following large wholesale declines in May, June, and July,” said Smoke. Vehicles are depreciating assets. The unique conditions that led to unprecedented appreciation in vehicle values in 2020 and 2021 have been replaced by more normal conditions where demand and supply are more balanced.”
Noting that retail used prices have dipped about 3% from their peak in April, Smoke predicts used vehicles will become more affordable in the second half of 2023 as inflation continues its descend to a “soft landing.”
“Recent trends point to a calmer and more predictable auto market in future months compared to the road traveled in recent years,” Smoke stated. “Over the last three years, demand has often been more than the market could bear, and that’s precisely why we had record auto-related inflation, which contributed to the inflation that the Fed has been fighting.”
The U.S. inflation rate currently sits at 3.0%, compared to 4.0% last month and 9.1% last year. This rate is the lowest since March 2021 and is significantly contributing to recent used car trends. “Inflation is absolutely playing a part in reduced used car prices because consumers have to spend more for everything else, including rent and food, which limits their car-buying budget,” Karl Brauer, executive analyst at iSeeCars, told Newsweek.
However, supply and low inventory is still a worry. According to KBB, inventory has stabilized, but because automakers built eight million fewer cars during the pandemic, used car lots might be emptier than both dealers and buyers would like “for years.”
Using estimates based on vAuto data as of July 10, used retail days’ supply was 46 days. This is down one day from the end of June, down six days year-over-year and down two days compared with the same week in 2019, per Manheim.
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