Finally, Inflation Relief! Used Cars Are Finally Dropping in Price — But Slowly
Prices are moving in the right direction but we're still facing a major affordability problem.
A new report shows that used cars are finally dropping in price after record-high prices during the pandemic. The price decline is slow-moving, but it appears that we are far away from our peak when it comes to the skyrocketing prices of used cars.
According to CNBC, wholesale used-vehicle prices are falling from the record high prices earlier this year. In January, inflation rose the costs of used cars to astronomical levels. A previous report indicated that some used cars were up 69 percent in price from the prior year. And that wasn’t a wild number. The Wall Street Journal shared that used car prices rose 40.5 percent overall last year, citing data from the Labor Department.
Now, thankfully, those prices are now dropping. For the third month in a row, the average price of a used car sold has declined. In March the average price was $27,246 – which is $362 less than February and close to $1,000 less than last December’s prices.
It’s a very welcome drop, and wholesale prices have dropped 6.4 percent since January’s record-high prices. However, the prices are still, overall, really high, and prices are still up 14 percent from a year ago, according to CNBC.
The reason for the high prices for used cars – and why prices are still high right now – is sort of a bottleneck issue. When the pandemic first began, the prices for new cars went up significantly because automakers were unable to build cars fast enough to meet the demand (this slow-up was a mix of workers off sick and a global shortage of microchips). When people on the market for a new car were unable to buy a new one, they entered the used-vehicle market – along with their higher budgets.
With less inventory, plus more people who would be looking for new cars looking at used ones instead, it’s driven the prices of used cars, and has made it practically impossible to find an affordable one. A decade ago, finding a used car for under $10,000 wasn’t impossible – and there were likely many to choose from. However, that’s not the case today.
“The least expensive cars remain the hardest to find,” Kelly Blue Book states. “Dealers closed March with just a 26-day supply of used cars under $10,000.” However, used cars priced over $35,000 had more than double the supply.
This highlights a very real affordability issue. People who typically had the funds to buy new are now buying up the used inventory, and those who could only afford used cars on the lower pay scale have nowhere to turn – and no other options.