For the first time since the pandemic, second hand car prices have started to decline.
In an industry anomille, used cars prices skyrocketed through the pandemic with supply chain issues causeing what was nicknamed Coved Tax. Click here to unpack that term.
In the United States the overall used car price fell 4.2% in June, their biggest monthly drop since the early days of the pandemic, as a key measure of inflation eases.
Supply chain slowly getting back up and running, coupled with rising interest rates and bigger discounts on new vehicles on the lot are reducing the demand for used vehicles, which is lowering the prices they fetch at auction houses. This is where many used car yards buy their inventory to stock the yards. Pricing also is taking a hit as Dealerships selling new vehicles have been able to replenished inventory on used-car lots that were depleted by shutdowns and supply shortages during the pandemic.
Used-car prices have been a key driver of core inflation in the US, which strips out food and energy prices. Core inflation has been especially sticky this year, even as the headline inflation rate has fallen.
What is encouraging is if you are in the automotive industry, is that overall spending on vehicles, both new and used is up an estimated 10% from a year ago.
Unfortunately this trend will be directly related to the interest rate rises forecast for the future.
But for now, for buyers of used vehicles this is the first movement in the direction of the market returning to some degree of normal. Through out the pandemic our customers were advised to not attempt to buy used cars. This is the signs that perhaps now or even in the foreseeable future, used cars may return to a sensible pricing structure.