Used car prices continue to tumble from historic peak

Used vehicle prices are falling faster than other goods in response to factors in the new car market.

Driving the news: Since hitting an all-time high in early 2022, used car prices have been falling rapidly, a trend that continued into July of this year.

• Used cars and trucks saw month-over-month price drops of 2.3% in July, according to the Bureau of Labor Statistics’ Consumer Price Index (CPI) report. On an annual basis, prices in the segment have fallen 10.9%.

• Both percentages represent the steepest declines of any measure examined in the CPI.

• Used car values are down nearly 20% from their peak in 2022 but remain about 17% higher than pre-pandemic norms.

The intrigue: What’s interesting is how quickly preowned values are dropping relative to other trends.

• The recovery of auto manufacturing has resulted in an increase in inventory and discounting.

• While the impact of those two factors was quickly visible in used car prices, new vehicles are taking longer to respond: prices in the segment were down only 0.2% from June and 1.4% from July 2023.

• And while car values, on the whole, are depreciating, other expenses, such as insurance and financing costs are actually getting more expensive. Auto insurance premiums, for example, are set to cost $2,469 annually by the end of this year, up 22% from 2023.

Bottom line: The used vehicle market has become more consumer-friendly in a short amount of time compared to other segments. Even so, affordability issues remain rampant, meaning the industry still has quite a ways to go before a sense of normalcy returns.

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