Used vehicle prices rising at an unseasonably strong rate
A used car dealership is seen in Annapolis, Maryland on May 27, 2021, as many car dealerships across the country are running low on new vehicles as a computer chip shortage has caused production at many vehicle manufactures to nearly stop.
Jim Watson | AFP | Getty Images
DETROIT — Consumers hoping for a deal this spring on a used car or truck might be out of luck, as wholesale used vehicle prices increased for a third consecutive month in February.
Cox Automotive on Tuesday reported wholesale used vehicle prices increased 4.3% in February from January — marking the largest increase between the two months since 2009.
Although the prices were down 7% from inflated levels a year earlier, they’re trending back toward record levels, according to Cox’s Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at its U.S. wholesale auctions.
The unseasonably strong increase is bad news for consumers hoping for a deal, as well as for the Biden administration, which has seen pre-owned vehicle prices as a barometer for easing inflation.
Federal Reserve Chairman Jerome Powell on Tuesday cautioned that interest rates are likely to head higher than central bank policymakers had expected, citing data that inflation has reversed the deceleration it showed in late 2022.
Higher interest rates mean vehicles become less affordable for consumers, who have been dealing with record-high new and used vehicle prices for several years now.
Cox reports the average listed price of a used vehicle was $26,510 in January, the most recent data available, down from record highs last year of more than $28,000. Retail prices for consumers traditionally follow changes in wholesale prices.
Cox estimates that used vehicle retail sales declined 5% from January to February and were down 9% from a year earlier.
Used vehicle prices have been elevated since the start of the coronavirus pandemic, as the global health crisis, combined with supply chain issues, caused production of new vehicles to sporadically idle. That led to a low supply of new vehicles and record-high prices amid resilient demand. The costs and scarcity of inventory led consumers to buy used vehicles, increasing those prices as well.