Used-Car Prices Collapse Most On Record
Readers have been well informed that the used car market bubble popped earlier this year (read: here). Cox Automotive reported that its Manheim Used Vehicle Value Index, which tracks the auction prices of used cars, plunged 14.2% from a year ago. The index has also slid to the lowest point since August 2021 as used-car sales tumbled 10% in November.
November’s monthly decline on a year-over-year basis of 14.2% was the largest ever on Manheim’s data.
The index fell to 199.4 last month, below the 200 mark for the first time since August 2021, and is down 15% from the peak in January. However, the index is still 58% higher since the start of the pandemic.
A combination of new car supply and soaring borrowing rates have been the drivers of deflating the bubble. Cox chief economist Jonathan Smoke explained more:
“New inventory is finally starting to build, and that’s producing momentum in new retail sales, but that momentum appears to be at the expense of used retail. Especially it’s the traditionally used car buyer that’s most impacted by payment affordability.”
What happens next is that retail prices will start to decrease because of the high correlation to wholesale prices. The used car bubble has possibly, claimed the first victim: Carvana, whose stock imploded Wednesday after its creditors formed a pact as bankruptcy risks soar.
And like we’ve told readers, wait until 2023 for deals as it’s a process from the time the Federal Reserve hikes interest rates to shooting up borrowing costs for consumers to curbing the demand side while supply side snarls alleviate; all of this are the perfect ingredients for lower prices moving forward.
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