- Used car price fell to its lowest level since August 2021.
- However, high interest rates continue to make many car buyers inaccessible.
- However, those who are less financially dependent on their car purchases can benefit.
Per Cox Automotive’s Manheim Used Car Value Indextrack the wholesale prices of used vehicles sold in the US Auction, used car prices is at its lowest level since August 2021, with the down nearly 16% since peaking in January.
“New inventory is finally starting to build and that is creating an impetus for new retail sales, but that momentum seems to have come at the expense of used retail,” the economist said. Cox’s chief, Jonathan Smoke said Tuesday.
Like lack of semiconductor interrupt the production process new car In the last few years, the demand for used cars soaring, causing prices to skyrocket. But new car inventory is finally increasing, relieve pressure on the used car market. At the same time the supply is improving, demand has decreased. Even when prices have started to fall, bad finances – largely due to inflation – has continued to deter some market participants. That’s one of the reasons used car retailer Carvana on the verge of bankruptcy even though experienced sales spikes earlier during the pandemic.
Together, these dynamics have provided used car buyers with some long-awaited discounts.
But that’s not all good news.
As the Federal Reserve has interest rate increase In an effort to cool down inflation, interest rates above car loan have increased together. In October, the average annual percentage (APR) used car loan rates rose to 9.6%, the highest level in more than a decade. Used car buyers are get bigger loans more than ever, another factor contributing to increased interest payments.
So, while higher interest rates have contributed to a drop in the demand — and price — of used vehicles — they could drive people who depend on auto loans significantly to buy a car. inaccessible. For example, according to Experian, average monthly used car payment — account for both principal and interest — increased from $472 to $525 from July to September, compared with the same period last year.
Jessica Caldwell, chief executive officer of Edmunds, said: “New vehicle inventories could eventually improve, but the auto industry still has a long way to go to recovery as rising interest rates are creating major barrier for car buyers. told Insider earlier in an email.
However, for those who are less financially dependent to buy a car, this could be their best chance to buy an affordable car for more than a year.
While new car market is expected to cool down At the same time, used car prices continue to be where the best bargains come from. Per Cox, typical monthly estimate car expenses buy a new car rises to a record high of $748 per month in October, due to high prices and interest rates.
Like Cox’s Smoke said in an October note“New cars may eventually become more available when most Americans can no longer afford them.”