The drop in used car prices is bad news for sellers but good news for buyers?

Bill Nash, CEO of CarMax, spoke out last week about where used car values are headed. The company failed to meet its earnings targets despite a $100 increase in average sales price.

However, sales are down as consumers face inflation and high retail prices. But, Nash stated that wholesale prices were “affected by steep depreciation in the water,” which could adversely affect its dealer auction business.

Manheim, the auction house that owns most of the wholesale market, has released a new report which shows that wholesale prices fell 2.3% in September after a 4% fall in August.

Chris Frey is the senior manager of industry insight at Manheim’s parent company Cox Automotive. He said that lower prices are still not reaching consumers.

Frey stated that “used vehicle retail demand has remained relatively stable through the second half of 2022, and it is unlikely to change significantly as new inventory remains challenging.”

“While some shoppers are feeling the pinch of higher interest rates, overall we believe that used vehicle demand will be steady throughout the year.”

Frey stated that used car inventories are healthy and that Cox sees “an opening for price softening at the retail level.” However, it isn’t happening yet because supply and demand are balanced right now.

“Prices are rising, but there aren’t any significant moves up or down. The average list price is $28,000. Frey stated that although wholesale prices have fallen in recent months, retail prices have remained steady.”

“Historical trends could come back into play and pricing power may weaken, but for now, the outlook is stable.”

Recent car buyers may be shocked when the prices drop due to the high prices paid and further mileage-related depreciation. This could leave them underwater on their loans.

Shannon Bradley, NerdWallet’s auto loan specialist, said that to sell, trade-in, or refinance a car, you would have to pay the difference between the amount owed and its value.

Another option is to pay more on the principal of the loan, either monthly or in one lump sum. Refinance is an option for underwater borrowers, though it may not work well with rising rates. Last, borrowers should speak to their lenders to see if they can offer any assistance.

About The Author

Leave a Comment

Scroll to Top