An indication reads ‘We Purchase Used Vehicles!!’ at an auto dealership on February 15, 2023 in Glendale, California.
Mario Tama | Getty Photographs
DETROIT – Wholesale used car costs reached their lowest stage of the yr in Could, as gross sales fell amid excessive rates of interest and inflated retail costs.
Cox Automotive reported Wednesday a 2.7% decline from April to Could in its Manheim Used Vehicle Value Index to 224.5. It marks the second consecutive month-to-month decline and the index’s lowest stage since 219.3 in December.
The index, which tracks autos bought at its U.S. wholesale dealership auctions, stays elevated from historic ranges however is expected to continue to decline this yr amid enhancing new car stock ranges and excessive rates of interest that look like scaring off customers.
“Taking an extended view, Could’s year-over-year decline accelerated from April and March; nonetheless, the speed of decline may gradual over the following a number of months as we encounter the decrease costs seen at public sale from Could by way of November final yr,” mentioned Chris Frey, Cox senior supervisor of financial and business insights, in a launch.
Used retail gross sales are estimated to have been down 11% yr over yr in Could, Cox studies. The notable decline comes as many People, particularly these with lower credit ratings, are being priced out of the market and repairing their autos as an alternative of changing them.
The declines in gross sales and wholesale costs sign the used car market is weakening, in accordance with Cox. That is not good for U.S. auto sellers however a win for the Federal Reserve’s battle to taper inflation by ratcheting up rates of interest.
Used car costs have more and more change into a barometer for inflation since early final yr when the Biden administration blamed the market for rising inflation rates.
Used car costs have been elevated for the reason that early days of the coronavirus pandemic, as the worldwide well being disaster mixed with provide chain points brought about manufacturing of recent autos to sporadically idle. That led to a low provide of recent autos and record-high costs amid resilient demand. The prices and shortage of stock led customers to the used car market, boosting these costs as effectively.
Continued declines might assist carry used car pricing down for customers, since retail costs historically comply with adjustments in wholesale costs. Nevertheless, that has not been the case so far, as the typical retail itemizing value for a used car moved 0.8% larger during the last 4 weeks, Cox studies.
Cox studies the typical listed value of a used car was $26,969 in April, the latest information obtainable.
