Are Used Car Prices Finally Stabilizing?

[carmigo]

A small increase in used car prices may indicate stability.
For the first time this summer, the Manheim Used Vehicle Index saw a slight uptick. We also saw the number of used vehicles sold go up since October.

That doesn’t mean used car prices are about to go back up. But hopefully, we’ll see prices stabilize here through the holiday season. Heck, they might even go up a bit as holiday purchasing reduces overall availability.

USED CAR PRICES HAVE BEEN ON THE FALL IN RECENT MONTHS, BUT THE MANHEIM USED CAR INDEX SHOWS PRICES ARE STILL MUCH HIGHER COMPARED WITH PREVIOUS YEARS’ TRENDS.

Used Car Prices Stabilize as Activity Increases
At Carmigo, we haven’t seen much of an increase in the number of cars selling, but we have seen a marked increase in the number of offers being made to sellers.

We think this trend is due to increased demand from buyers, even if the sales haven’t gone up yet. This is because the prices sellers are expecting and the prices buyers are willing to pay haven’t quite evened out. Now that the prices have leveled out for a little while, buyers and sellers have time to adjust their expectations.

New Vehicle Inventory Reduces Used Car Demand
Part of the reason prices were so high leading up to this summer was the relatively low availability of new cars. Now that new car inventory has reached 2021 levels (according to ZeroSum Market), buyers are no longer turning to used cars out of necessity.

The silver lining in this ZeroSum report is a slight decrease in used car inventory, meaning prices shouldn’t continue to drop in the interim.

Fewer used cars available means higher prices for sellers, keeping used car prices stable in spite of increased new car inventory.

Used Car Prices are Still at Record Levels
Because we’ve seen such steady declines in used car prices over the past few months, many sellers have lost sight of the fact that prices are still much higher than at any point in the past decade.

Year on year, the Manheim Used Car Index (and used car prices/demand overall) has gone up or down a few points each year, with the overall trend being incremental growth. Up five points one year, down two points the next, and so on.

But in 2021, the index shot up from about 130 to 240.

So even though we’ve seen a 40-point decline in the last few months, the current index is still astronomically higher than it was this time two years ago.

What Do Used Car Prices Mean for You?
So what can you expect if you sell your car this winter? You can expect to make less than you would have this summer, but still much more than at any time in the history of used car sales.

Because the demand for used cars has gone down, dealerships only want to stock their lots with used cars that will sell quickly. That means cars like Accords, Camrys, F150s, and small crossovers like the Hyundai Santa Fe will attract more offers.

That doesn’t mean you can’t sell a larger SUV or luxury car this winter, you just may not see as much interest in more expensive models.

Performance cars are certainly selling in the current market, but the offers we're seeing come through are typically a little lower than what sellers want.

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[Benjilis]

Used car prices went up because companies like Carvana hoarded them all.
carvana will soon go bankrupt and the price of used cars will tank and new car prices will return to normal.

 

[PikkaGTR]

One can only hope that happens sooner rather than later

 

[VA90]

Seems premature to claim that used car prices are broadly stabilizing. The economy is in the first few innings of a potential recession and the Fed may not be done raising interest rates. Carmax's atrocious results and Carvana's looming bankruptcy seem to suggest prices have quite a way to go (down). But I guess we will see.

 

[carmigo]

Used car prices went up because companies like Carvana hoarded them all.
carvana will soon go bankrupt and the price of used cars will tank and new car prices will return to normal.

interesting take! it's gonna be fascinating to see how it all unfolds.

 

[carmigo]

One can only hope that happens sooner rather than later

fingers are crossed

 

[robotvoice]

Used car prices went up because companies like Carvana hoarded them all.
carvana will soon go bankrupt and the price of used cars will tank and new car prices will return to normal.

Um, no. Carvana isn't the only reason that used car prices are where they are at now. You've got global supply chain issues caused by the pandemic making it really hard to buy brand new cars so a lot of people look at newer used cars instead. Also a lot of people can't even afford brand new cars so a used car might be their only option.

Companies like Carvana didn't cause this mess but they are absolutely taking advantage of it. As long as people are paying insane prices for used cars, the prices just won't magically come down overnight. It's going to be YEARS before things really return back to normal.

 

[carmigo]

Seems premature to claim that used car prices are broadly stabilizing. The economy is in the first few innings of a potential recession and the Fed may not be done raising interest rates. Carmax's atrocious results and Carvana's looming bankruptcy seem to suggest prices have quite a way to go (down). But I guess we will see.

Just reporting it as we go, of course things could take a turn

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