A sign advertises cash payment for used cars at the Alhambra, California on January 12, 2022.
Frederic J Brown | AFP | Getty Images
DETROIT – Used vehicle wholesale prices fell significantly from a record high, set in January, signaling the worst in skyrocketing prices related to higher inflation in the United States it may be behind us.
Cox Automotive said Friday that its Manheim Used Vehicle Value Index, which tracks the prices of used vehicles sold at its wholesale auctions in the United States, fell 1% in April from March, marking the third consecutive month of declines from the first month. of the year.
“We are clearly back to vehicle depreciation again. This is good news for both inflation and consumers looking to buy a vehicle,” Jonathan Smoke, chief economist at Cox Automotive, told CNBC.
Wholesale vehicle prices fell 6.4% from a January record. However, prices are still extremely high and the index remains up 14% from a year ago.
The drop in prices comes as Manheim estimates that used retail sales fell 13% in April from March, suggesting that demand is easing amid record prices.
Car manufacturers have been fighting through a for more than a year shortage of semiconductor chips which has sporadically ceased production of new vehicles, resulting in record low vehicle inventories and higher prices. Circumstances have pushed many buyers into the used car market.
Smoke expects used vehicle prices to remain high but return to “fairly normal models”, with the potential for some modest price increases over the course of the year.
“It is potentially getting a bit deflationary in that regard,” Smoke said, adding that that doesn’t necessarily mean there will be a massive price correction. “This is not a commodity market that people are speculating on and used vehicles are assets that actually provide people with utility.”
“Over the past two years we have had an unusual circumstance that has spurred demand and we have limited supply,” he said.
Such declines are good news for the Biden administration, which has blamed much of the rise in inflation rates in the country. on the second-hand market. Over the past 20 years, the contribution of used cars to inflation has averaged zero. In January, it contributed more than 1% year-on-year, according to data from the United States Bureau of Labor Statistics.
Persistent inflation has pushed prices up to historic levels over the past year. The trend has been politically damaging to the Biden administration and has fueled fears of “stagflation,” an unwanted mix of rising prices and stagnant economic growth.
– CNBC Kevin Breuinger contributed to this report.