Though up slightly from November, used car prices paid by wholesalers last month fell the most on a yearly basis since at least the late 1990s—continuing a steep decline that should bode well for overall inflation, which has long been plagued by supply chain constraints driving up the price of used vehicles.
“New and used car prices likely will decline through most of 2023,” says one economist.
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Used vehicle prices in the U.S. increased 0.8% from November to December but plunged 14.9% from one year prior, according to the Manheim used-vehicle price index released Monday, marking the biggest-ever annual decline for the index, which tracks the prices of used vehicles sold at wholesale auctions.
SUVs were among vehicles posting the biggest annual price declines, falling 16.6%, while midsize cars fell 15.8% and luxury cars fell 15.2%.
The release, which dates back to the late 1990s, marks the third-consecutive year-over-year decline for used car prices, which skyrocketed as much as nearly 60% during the pandemic as supply-chain disruptions for key components like semiconductors plagued the industry.
“New and used car prices likely will decline through most of 2023,” Pantheon Macro chief economist Ian Shepherdson said in a recent note, pointing out profit margins for auto dealers rose faster than anywhere else during the pandemic and have “much further to fall” as supply chain concerns abate.
In a note to clients last month, Goldman Sachs economists also said they expect used car prices to decline for consumers, reflecting lower auction prices and easing supply constraints and ultimately helping overall inflation, as measured by the consumer price index, moderate throughout the year.
According to automotive research firm CarGurus, the average listing price of a used car is $28,755—down from a high of more than $31,000 reached last year but still far above pre-pandemic levels of about $21,300.
What To Watch For
The Bureau of Labor Statistics will release its inflation report for December on Thursday. Bank of America economists believe the consumer price index fell by 0.1% from November to December and that core prices fell 0.5%, marking a third-straight month of declines, thanks to “another large decline in used car prices as the category continues to retrace its earlier surge.” Last month, falling used-vehicle prices (down 2.9%) helped the overall inflation figure cool more than economists expected.
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