Used-Car Prices Reaccelerate With Biggest February Gain Since 2009
The decline in wholesale used-car prices appears temporary as the spring market shifts into gear amid supply woes.
Cox Automotive reported that its Manheim Used Vehicle Value Index (MUVVI), which tracks the auction prices of used cars, increased 4.3% in February from January, the largest increase for the full month of February since 2009's 4.4% rise.
"Used-vehicle prices increased 4.3% in February from January. This was the largest increase for the full month of February since 2009’s 4.4% rise" - Manheim Used Vehicle Index pic.twitter.com/5H9yD3C3H2— zerohedge (@zerohedge) March 7, 2023
Used-car prices peaked around April 2022 and have been trending slightly lower. But the latest year-over-year change in the data shows a slowing decline and monthly reacceleration in prices -- all of this is a troubling sign for the Federal Reserve as January's economic data was hotter than expected.
"These figures probably won't show up in the official data until March (i.e., the figures released in April)... which implies that the glide path to sustainably lower inflation is likely to remain a bumpy one unless core service prices start behaving pronto," Bloomberg said.
The increase in wholesale used-car prices in February is also a concern for retail used-car buyers. Prices could accelerate even more (first noted the acceleration last month), aided by tax-return checks this spring.
Although the supply of new vehicles, greatly affected by a chip shortage and other supply-chain issues in the early days of the virus pandemic, has improved, the lack of new cars pushed many buyers into the used car market... And this has caused:
"Used-car retail inventories are declining more quickly than we expected," Chris Frey, senior manager of economic and industry insights at Cox Automotive, warned.
Last month, automotive expert "CarDealershipGuy" was among the first to point out used car supply woes. He tweeted:
As my friend @realEstateTrent likes to say, you can learn about it last month on Twitter or today in the news... https://t.co/Fp4oMZA0Ge— CarDealershipGuy (@GuyDealership) March 7, 2023
Edmunds reports that the average price of a used car this year rose to $28,106, a 38% increase from the average price of $20,409 in January 2020. This is compared to a new car's average price of $48,000.
Where oh where is this surge in car prices coming from pic.twitter.com/0LjaSgB59P— zerohedge (@zerohedge) March 7, 2023
Meanwhile, the cost of ownership of a new car is soaring. Price affordability concerns mount as car prices remain high and interest rates surge. We've detailed that many Americans have $1,000 monthly payments and might be unable to afford those vehicles as the economy falters. Even used car auto loan interest rates are soaring, the highest in more than a decade.
Hot used car data is not what the Fed wants to see.