America's Used Car Prices Are Expected To Increase Again
The data is coming in, and it's not looking pleasant.
New data indicates that used car prices in the US will soon increase again, following a steady decline for most of last year.
This news should come as a surprise and an unpleasant one at that. Last month, we reported that used vehicle prices were expected to return to normal in 2023 following record increases in 2021 during the Covid pandemic. Last year, used vehicle prices steadily declined, but a new report from CBS Newsclaims things are about to change.
The latest data shows that wholesale used car prices have increased by 4% in just the last two weeks. Higher wholesale prices translate to higher dealership prices for buyers. "We did not anticipate that prices would jump as much as they have," said Chris Frey, senior industry analyst at Cox Automotive. "It made my eyes jump out."
Basically, it's this: dealers began stocking fewer and fewer pre-owned vehicles as more new vehicles became available. That caused used car prices to drop. But Americans will start receiving tax refunds, driving up vehicle demand, and dealers must buy more vehicles in preparation. Increased used car prices are the result. The economy is also a factor. The recession many analysts predicted would happen has yet to happen.
Instead, the economy added over 500,000 jobs in January, surpassing predictions. When you have lots of people employed, they require vehicles to get to work, further fueling demand.
"If you want to point at one factor that drives demand for cars, it's jobs," said Ivan Drury, director of insights at Edmunds. "If you've got a job, you've got a car."