- Used car prices have fallen to their lowest since August 2021.
- However, high interest rates continue to keep cars out of reach for many buyers.
- However, those who are less dependent on financing to purchase a car may benefit.
For the past few years, record used car prices have become a symbol of extremely high inflation across the United States. This is finally changing, but many car buyers may be forced to wait on the sidelines.
According to Per Cox Automotive’s Mannheim Used Car Value Index, which tracks wholesale prices of used cars sold at U.S. auctions, used car prices are at their lowest level since August 2021 and peaked in January. Since then, the index has fallen nearly 16%.
“New inventory is finally starting to pile up, and that’s giving momentum to new retail sales, but that momentum appears to be coming at the expense of second-hand retail,” said Jonathan Smoke, chief economist at Cox.
Over the past few years, shortages of semiconductors have disrupted the production of new cars, resulting in a surge in demand for used cars and a surge in prices. However, new car inventories have finally increased, relieving some of the pressure on the used car market. While supply is improving, demand is falling. Fiscal deterioration, mainly due to inflation, continues to discourage participation from some markets, even though prices have started to fall. He’s one of the reasons his used-car retailer, Carvana, is on the brink of bankruptcy, despite a surge in sales early in the pandemic.
These dynamics have combined to bring much-needed price relief to used-car buyers.
But it’s not all good news.
As the Federal Reserve raised interest rates to keep inflation in check, interest rates on auto loans rose in tandem. In October, the average annualized rate (APR) on used car loans rose to his 9.6%, the highest level in more than a decade. Used-car buyers are also taking out more loans than ever before, and he’s another factor in the surge in interest payments.
So while rising interest rates have contributed to lower demand and prices for used cars, used cars may be out of reach for those who rely on hefty auto loans to buy them. I have. For example, according to Experian, the average monthly payment (including both principal and interest) on a used car rose from $472 to $525 from July to September compared to the same period last year. .
Jessica Caldwell, executive director of insights at Edmunds, previously told Insider: on mail.
But for those less reliant on financing for car purchases, this could be your best chance to buy an affordable car in a year or more.
The new car market is also expected to cool, but used car prices continue to be a great bargain. Cox said the typical monthly payment for a new car rose to a record $748 a month in October due to rising prices and interest rates.
As Cox’s Smoke said in an October note, “New cars may finally be available when most Americans can no longer afford them.”