The price of used cars in the United States has been rising for the third consecutive year. The market is currently registering the highest used car prices of all time. The used car market is extremely high in demand and low in supply.
Cox Automotive reported that wholesale prices for used vehicles rose 4.3% in February compared to January, the largest two-month increase since 2009. Now it looks like the price hike will continue and used car prices are heading towards record levels. Cox’s Manheim Used Vehicle Value Index tracks the prices of used vehicles sold at wholesale auctions in the United States.
The reason for the upward trend in prices is not only that car companies produce fewer cars than the market needs, but also that the prices of newly launched cars are extremely high. A shortage of parts and raw materials has sent prices skyrocketing in the new car market, encouraging buyers to switch to used cars.
Cox Automotive analysts explain this situation by the fact that the automotive industry has still not recovered from the shock caused by the epidemic. After the outbreak of the coronavirus epidemic, in the spring of 2020 – due to a drastic drop in demand – the majority of brands suddenly stopped production. However, after the epidemic subsided, demand quickly rose, which the manufacturers could not keep up with. Therefore, the demand for used cars increased significantly, because at that time the buyers came out of the quarantine with a lot of saved cash and a great desire to buy cars.
The economic difficulties caused by the pandemic have also increased the demand for more affordable and fuel-efficient vehicles in the secondary market. For this reason, American experts predict a further increase in the price of used cars.
Because of all these factors, the American used car market was in a difficult situation. At the same time, the protracted economic difficulties caused by the epidemic hit him, the lack of new cars and the increase in their prices are felt.
Consumers who put off buying a used car or truck in hopes of spring price drops were left in the dark, as wholesale used vehicle prices rose for the third consecutive month in February.
Seasonally strong price increases are bad news for hopeful consumers and for the Biden administration, which has viewed used vehicle prices as a barometer of inflation moderation.
Federal Reserve (FED) Chairman Jerome Powell has warned that interest rates are likely to be higher than central bank policymakers expected, as inflation reversed the slowdown in price increases seen in late 2022.
Higher interest rates mean vehicles are less affordable for consumers, who have been facing years of record high prices in both the new and used car markets.
Cox reports that the average listing price for a used vehicle was $26,510 in January of this year. Retail sales of used vehicles fell 5% between January and February and were down 9% from a year earlier.
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