Used car prices fell in January, data from the U.S. Bureau of Labor Statistics revealed on Tuesday, in another signal that the cost of pre-owned vehicles was moderating from its pandemic highs, an analyst told Newsweek.
The cost of a used car or truck fell by 3.4 percent in January from the previous month and for the year it decelerated by 3.5 percent, according to government data.
Part of the reason that prices are falling is due to the improved availability of new cars, Ivan Drury, director of insights at automotive resource platform Edmunds.com, said.
As supply chains ground to a halt during COVID, inventory of new cars at dealerships saw dramatic declines. Buyers instead turned to the used buyers market, sending prices through the roof. But as the supply of new cars has improved, this has helped push down prices for used vehicles, Drury told Newsweek.
"You could virtually ask for anything you want as a used car dealer, and they were getting prices that were above what the vehicle sold for when it's brand new. That's no longer the case," he said.
While the supply of new cars has yet to return to pre-pandemic levels, they are staying at dealers' lots slightly longer and that is having a trickle-down effect on the price of used cars.
"The reason why they were just so out of control before is because you virtually had no new car equivalent or replacement product. It was used car or nothing and that's why demand was so high for years," Drury said.
Prices are still above where they were before COVID hit, Drury pointed out, with an average price of a car currently at $27,000 in January compared to pre-pandemic values of $20,000. Nevertheless, this was much lower than the peak of April 2022, when it soared to over $31,000.
Drury suggested that one segment that is seeing improved prices for buyers is the electric vehicle (EV) market.
"Not only is there a market correction involved with used EVs, if you can find one that's $25,000 or below, there is a tax credit that you might be able to get as well," Drury said.
The outlook for the year, according to Drury, is that prices will keep falling but it's unlikely there will be a crash in used car values.
"Don't expect anything, as far as falling off a cliff," he said. "The supply side issue that we will face for the used market that's gonna be a problem that exists for not just this year, but for next year as well."
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
