NEW YORK–The root cause for ongoing inventory and pricing issues in the U.S. used vehicle market, which has been a barometer for the country's inflation levels, will not be letting up anytime soon, according to one new analysis.
The reduced production of new cars and supply chain issues across the industry continue to create bottlenecks that continue to be played out in used car prices.
“It's been three years since those initial plant closures, but American consumers — as well as the Biden administration — hoping for the used vehicle market to return to ‘normal’ pre-pandemic levels shouldn't hold their breath,” said CNBC in a new report. “A notable decline in used vehicle prices toward the end of last year has been roughly cut in half in 2023, as inventories remain significantly down following vehicle-production disruptions.”
Please Don’t Lease Me, Let Me Go
CNBC noted there has also been an uncharacteristically large number of consumers buying out leases to avoid sky-high car prices and increasing interest rates.
"It looks like it will persist for some time," Chris Frey, senior industry insights manager at Cox Automotive, told CNBC. "It's really a function of this hole in new production, creating a dynamic where wholesale or general used values are higher because there are millions of fewer new vehicles that would eventually turn into used."
Cox Automotive reports wholesale used vehicle prices are up by 8.8% this year through mid-March, according to the Manheim Used Vehicle Value Index, which tracks vehicles sold to dealers at auction, noted CNBC.
Trending Higher
“The prices are trending higher, and the index is heading back toward a record of 257.7 basis points set at the start of 2022. It was 238.6 as of mid-March,” the report added.
Meanwhile, Frey told CNBC used vehicle inventory is down 21% from a year ago and off a whopping 26% from pre-pandemic levels of 2.8 million available vehicles in 2019. Cox Automotive doesn't expect the total number of used sales to return to pre-pandemic levels of about 38.2 million units until at least 2026, Frey told the news outlet.
The Forecast
Cox Automotive previously forecast wholesale prices on the Manheim Used Vehicle Value Index to end 2023 down 4.3% from December 2022. The company has not revised that forecast but may need to do so amid the increasing wholesale prices, CNBC added.
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