A few months ago, the chances of buying a used car were slim unless you were prepared to pay grossly inflated prices. Ongoing supply chain disruptions that arose during the pandemic were exacerbated by the war in Ukraine, causing costs of used cars and trucks to skyrocket. Many consumers were priced out of the market entirely, with no tangible end in sight.
There hasn’t been a good time to buy a car over the past 12 months, but there looks to be some relief on the way. Used car prices are still up considerably from a year ago, but wholesale used vehicle prices have decreased by 6.4% since record highs in January, according to a CNBC report.
Furthermore, for the fourth consecutive month, the average price for a used car has dropped. The report claimed that the average price for a used vehicle in March 2022 was $27,246, which is $362 less than the previous month and almost $1,000 less than in December 2021.
According to Manheim’s Used Vehicle Value report, dealer wholesale prices in April fell 1% from March. Compared to the 3.3% drop from February to March, it’s small, but still a decrease. That’s an encouraging sign to prospective used car buyers.
Manheim’s Index — recognized by analysts as the premier indicator of pricing trends in the used vehicle market — declined to 221.2 for April 2022, down from the March index of 223.5. That’s the lowest level since September 2021. If you were on the fence about buying, now might be the right time to pounce.
The automotive industry is in this overblown pricing predicament due to demand for vehicles and their component parts far exceeding supply, which caused prices to escalate over high inflation. As sanctions against Russia continued, unavailable source material like palladium and neon gas — which are required for auto parts (i.e.: catalytic converters) and semiconductor production — caused damage to automotive makers throughout the world.
That means that demand for “cheaper” used vehicles increased even more than new ones. In fact, the past year has seen an increase of 13% for the average price of a new vehicle, according to Edmunds. Used prices have exceeded new, with an average price rising 29% over the same time.
Even so, the decline in used car prices is a good sign for buyers who have been patiently waiting out dramatic cost increases and vehicle shortages across the board. We haven’t hit a buyers’ market yet, but we’re slowly trending in that direction.
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