Used car prices, which began falling from their record highs last fall, are going up again – at least for dealers.
Cox Automotive reports the wholesale price dealers pay for used vehicles at auction jumped 4.3% from January to February, a significant one-month increase. Compared to February 2022’s inflated prices, however, used car values were down 7% last month.
Still, it’s not good news for consumers priced out of the new car market – those prices have risen consistently over the last few months. Rising interest rates make financing either a new or used car more expensive.
Karl Brauer, executive analyst at iSeeCars.com, says the February increase is not all that surprising, noting consumers receiving early tax refunds may be responsible for increasing demand and therefore, prices.
‘Is it sustainable?’
“The real question is, how sustainable is this shift in pricing?” Brauer told ConsumerAffairs. “In a normal year used car prices consistently rise from February through November, then fall sharply until the next February. I don’t expect the consistent rise to happen this year. It might, but I think tax-return spending will prop up prices for a couple of months before they fall again, particularly if macroeconomic factors like inflation and interest rates reduce consumer spending.”
Consumers who are planning on buying a used car or truck might consider waiting a month or two to see if prices begin to fall again. If Brauer is correct, inventories could rise and prices fall by the middle of this year.
The only caveat is interest rates. Federal Reserve Chairman Jerome Powell this week signaled the need to keep raising interest rates to tamp down stubborn inflation. Every time the Fed hikes rates, auto lenders increase the interest rate on used car loans.
In January the average used vehicle cost $26,510. That was down from $28,000 in January 2022.