Goldman Sachs chief economist Jan Hatzius told clients Wednesday, "used car prices probably peaked in June based on declines in auction prices."
Hatzius explains the stimulus-driven surge in demand and semiconductor shortages resulted in a drawdown in inventories and a massive jump in prices for new and used cars over the last year.
New car inventories are expected to begin recovering in September after chip shortages somewhat decrease, but there will still be supply chain disruptions that will drag well into 2022.
He lays out commentary from top automakers who report semiconductor shortages will continue to constrain production.
"We expect that inventories will be steadily rebuilt starting in September but will still remain well below their pre-pandemic level through the end of 2022. We expect a somewhat earlier recovery for used car inventories (which fell by a much smaller amount) following recent data showing sequential monthly increases from an April bottom," Hatzius said.
So here it is, for readers who are on the fence about selling their used car.
Now could be the best time ever, and the window is closing. Hatzius explains: "Based on a statistical model that incorporates our auto inventory and sales forecasts as well as lagged price growth, we estimate that used car prices will retrace almost 35% of their increase since the start of the pandemic by end-2021 and over 70% by end-2022, with tight inventories preventing faster normalization."
A steep correction in used car prices could be ahead as explained by Goldman. We outlined a month ago that used car prices "finally peaked."