Posted Monday, Jun 19, 2023
Used car prices in the United States have recently shown signs of relief, declining for the second consecutive month. Amidst soaring prices for both new and used vehicles due to heightened demand and supply shortages caused by the COVID-19 pandemic, this downward trend offers a glimmer of hope for those seeking an affordable ride. In this blog post, we delve into the latest market data, explore expert insights, and examine the broader implications for consumers.
The Manheim Used Vehicle Value Index, a widely recognized industry benchmark, recorded a 2.7% drop in May, with the index falling to 224.5 from April's reading of 230.8. This decline represents a 7.6% decrease compared to the same period last year. For individuals looking to purchase a vehicle, this news comes as a modest relief.
Chris Frey, senior manager of economic and industry insights for Cox Automotive, advises caution when interpreting the current trend. While the year-over-year decline in May accelerated from previous months, Frey emphasizes that the rate of decline may slow in the upcoming months as prices encountered in auctions from May through November of the previous year could influence the market.
Although the recent decline in used car prices is promising, it's important to maintain realistic expectations. Frey highlights that two consecutive drops in the index do not necessarily indicate a substantial long-term trend. One factor contributing to sustained prices is the shortage of used retail inventory, which keeps buyers engaged in auctions and supports price levels.
As new car prices reach all-time highs and interest rates begin to rise, Americans are holding onto their vehicles for longer periods. According to S&P Global Mobility, the average age of cars on U.S. roads has reached a record-breaking 12.5 years. This trend reflects drivers' reluctance to bear the expense of replacing their vehicles and highlights the importance of affordability in the current market.
Since the onset of the COVID-19 pandemic, used vehicle prices have surged by approximately 40%, resulting in an average price close to $29,000. Combined with an average auto loan rate of 11%, the typical monthly payment for a used car has now reached $563. These figures underscore the financial strain faced by buyers and the need for more accessible options.
The recent decline in used car prices offers a glimmer of hope to those searching for more affordable options in the midst of a challenging market. While the downward trend is promising, it is important to approach the situation with cautious optimism. Factors such as limited used retail inventory and potential market fluctuations warrant careful consideration. As new car prices remain high and interest rates increase, the longevity of vehicles on the road continues to rise. Understanding the dynamics of the market and exploring alternatives, such as EZ AUTO, can help individuals navigate the evolving landscape and make informed decisions that align with their financial goals.
The information provided in this blog post is based on available data and expert opinions at the time of writing. Market conditions may change rapidly, and it is recommended to consult with industry professionals for the most up-to-date information and personalized advice.