Used car buyers encountered a heavy dose of inflation on the used car lot last month. Cox Automotive reports that the Manheim Used Vehicle Value Index (MUVVI) rose at a record pace in October.
It was the reverse of the normal trend. In a typical year, automakers push the next model year while making deals on the current one, causing the price of used cars to fall. But 2021 is anything but a typical year.
With a shortage of new cars, buyers are increasingly turning to used vehicles. That’s allowing dealers to raise prices. At the wholesale level, used vehicle prices increased by 9.2% in October from September, leaving the index up 38.1% year-over-year and at a new record.
With prices continuing to go up, used car sales went down. Sales were down an estimated 10% from October 2020. Compared to 2019, total used-vehicle sales were down 11%.
Some of those prospective buyers apparently found their way to the new car showroom because new car sales were slightly higher in October than in September, which came in at a record low. Compared to 2020, October’s new car sales were down 23%.
New car prices still rising
Just like used vehicles, when new cars and trucks did sell last month, they sold for more money. According to Kelley Blue Book (KBB), consumers paid an average of $46,036 for a new vehicle last month. That’s $5,266 more than one year ago.
According to KBB data, the average new car sold for 2% over manufacturers’ suggested retail price (MSRP) in October – about $800 more than the list price. One year before, buyers were spending an average of $2,300 less than the sticker price.
“Whether they are desperate or impatient, consumers continue to pay hundreds of dollars above the suggested price for new vehicles,” said Kayla Reynolds, an analyst for Cox Automotive. “While the average transaction price jumped to a new record high, the average incentive package fell to a 20-year low. To score a new vehicle, buyers are accepting no-haggle pricing, with significant market adjustments in some instances. It is absolutely a seller’s market right now.”
According to KBB, the total supply of new cars available for sale remains well under historical norms. That’s due largely to a global microchip shortage that has sidelined much of the auto industry’s planned production.
When they do acquire microchips, automakers are using them to build trucks, SUVs, and luxury cars because profit margins on those vehicles are higher.