Philip Nothard, insight and strategy director at Cox Automotive, said used car prices show no signs in reversing as there is no “tsunami of used stock” on the horizon and warned secondary markets had lost around 1.4mln vehicles. He said prices might stabilize in mid-2022 as the market reverts to some normalization but said a new benchmark for used vehicle values has been established and may never return to pre-pandemic levels.
Nothard said the lack of supply and snarled supply chains of new cars “will, without a doubt, have a bearing on the sector for years to come.”
Nothard said: “Back in July, we asserted that the used car market has never been more critical to the overall health of the automotive industry than it has been in 2021. The last few months have given more weight to this suggestion.”
“While prices have now increased for eight consecutive months, recent signs point towards a potential softening in the market. And while it remains the case that prices overall have continued to rise, the situation is becoming increasingly complex, with some models starting to see significant price decreases.
“Moreover, some figures we’ve observed are misleading, as it doesn’t represent live market data where many models that saw an increase at the start of the month, which dropped off by the end.
“It’s important to remember in the final month of the year that this is traditionally a slow period as retail activity slows ahead of Christmas. Prices are expected to drop in line with usual market cycles, so current prices still reflect a high demand with a low supply market. With prices as they are, dealers are becoming increasingly cautious, but as the year draws to a close, they will require stock for the new year, so prices are unlikely to drop significantly.
“We expect current market conditions to continue throughout Q1 2022, and it’s entirely possible that we are seeing a revised benchmark for the used vehicle.”
Manheim’s wholesale used car indicators showed that vehicle prices increased by 3.9% month-over-month in November. This brought the used car Manheim Used Vehicle Value Index to 232.5 (a new record high), a 43.5% increase from a year ago.
The Manheim Market Report said, “values saw weekly price increases decelerate and reverse over the course of November.”
As used car costs continue their vertical move higher and might never revisit pre-pandemic levels, this suggests the used car component of the Consumer Price Index (CPI) has more room to rise in November. CPI will be released on Friday and is expected to provide an update on the state of inflation that is now deemed persistent inflation as Fed Chairman Jerome Powell said last week it was time to retire the narrative “transitory.”
Consumers will have to get used to paying high prices for used cars. This will affect the working poor, the most, who have had their credit scores tarnished during the pandemic downturn. Thanks, Powell.
Thu, 12/09/2021 – 11:40
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Author: Tyler Durden