Used Vehicle Pricing Sets Another Record High

Matt Posky
by Matt Posky

Used-vehicle prices set another record last month thanks to elevated demand and suppressed production of new cars. Depending on who you ask, the typical transaction fee for a secondhand automobile rose nearly 50 percent in November vs the same period in 2020. While the pandemic had meaningfully suppressed demand during that time, that’s still a staggering increase over any 12-month period.

Sharing Cox Automotive’s Manheim Used Vehicle Value Index, Automotive News nailed down the annual difference to a 44-percent increase. This also represents the November pricing index swelling by 3.9 percent against October, which is noteworthy in itself. But what does that look like in dollars?

Data from iSeeCars has November 2021’s used-vehicle pricing by 27.9 percent against November 2020. The outlet estimated that tacked on a $6,939 premium to the typical automotive transaction.

“Used car prices had drifted down, slightly, since they peaked in June, but they are back on the rise again, with the average used vehicle priced nearly over $7,000 above where it was last November,” explained Karl Brauer, iSeeCars’ executive analyst. “With microchip shortage–related plant shutdowns persisting throughout the year, automakers have not kept pace with pent-up demand and lingering supply constraints that are expected to continue well into 2022.”

Considering that iSeeCars’ assessment of the price increase was positively tame compared the summary provided by Cox Automotive, there’s a chance some consumers are being forced to shell out the kind of dough that would have previously afforded them a second vehicle. On the upside, Cox’s Chief Economist Jonathan Smoke believes we’ve finally hit peak automotive pricing.

“In the weekly numbers, we’ve already seen moderation over the last couple of weeks, which is exactly what we were anticipating,” Smoke said. “So we think November is the peak for the year. Prices are probably going to stay about where they are — or the index is going to stay about where it is — through the end of the year.”

We wouldn’t assume anything at this juncture. Everyone thought the summer of 2021 was as bad as things could possibly get and now we’re looking at even steeper pricing going into the winter.

From AN:

New-vehicle inventory problems continued to plague dealers, forcing them to spend more money to obtain used-vehicle supplies for their lots. This pushed wholesale prices to new heights across all segments in November, according to Alex Yurchenko, chief data science officer at Black Book.

“Cars of all sizes and vans had the largest increases as used and new inventory in those segments declined to much lower levels compared to other segments of the market,” Yurchenko said in a news release.

Yurchenko said Black Book expects used-vehicle prices to increase again in December but at a much lower rate because the volume of new-vehicle inventory is beginning to level off and consumer demand is softening as a result of record-breaking used prices at retail.

Due to pricing that can only be described as absolutely ridiculous, used car sales have been on the decline since July. Total used-vehicle sales were down 10 percent (year over year in October) in the United States, bringing the seasonally adjusted annual rate (SAAR) of sales to 35.8 million. That’s down from 39.9 million in October 2021, though relatively flat compared to September’s 35.8 million SAAR. While it’s still a little early to determine Novembers figures, Wards Auto estimated sales to drop against the previous month.

On a long enough timeline, that should convince retailers to slash prices. But they haven’t done so yet and inventories are allegedly so strained that there may not be any reason for them to until deep into 2022. Fortunately, today’s inventories haven’t been universally agreed upon. Despite loads of talk about how the crippled supply chains have left automakers without the ability to produce, Cox has the retail used-vehicle supply sitting at 49 days against normal 44 day supply. Meanwhile, wholesale inventories were estimated to be at 29 days whereas a normal supply would be 23 days. Though what constitutes normal supply is relative — as Cox is using lower modern averages, rather than the what would have been typical just a few years ago.

[Image: David Touchtone/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Burgersandbeer Burgersandbeer on Dec 10, 2021

    Are vehicles 10-15 years old somewhat shielded from this? I want a truck for light duty suburban homeowner bs. It won't be a daily commuter, so it can be old. I would like to be able to load the kiddo in it in a pinch, so it shouldn't be too old. My hope is that higher prices are focused on newer cars that sane people might use for daily family transportation. Trucks have always had a high depreciation floor, so I'm having a hard time figuring out what an appropriate price is. Car gurus claims price jumps aren't as severe as what's discussed here - closer to 10-15% year over year for older stuff. Anyone of thoughts on older trucks in this market?

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    • 2ACL 2ACL on Dec 13, 2021

      @dal20402 Bingo. In my later high school/early collage years (early-mid 2000s), it was possible to pick up a 10+ year old, but otherwise fully viable (minimal mechanical issues, cosmetically sound) car for ~$3,500. Given the difficulty I had with finding an acceptable car for my girlfriend at $7,000 just prior to the pandemic (she eventually relented and doubled her budget), I can only imagine how difficult it would be to work with half of that today. I casually browse through Craigslist, and much of what I've come across for $3,500 is a potential project at best, crusher fodder at worst.

  • Jeff S Jeff S on Dec 10, 2021

    Just got an email today from Ford saying that my new hybrid Maverick will be produced the week of Feb. 14. Will get $500 off for Farm Bureau membership and nothing else but at least I did not pay above MSRP and total cost with tax, title and licensing will be less than 26k which includes spray in bed liner, full size spare, and all weather floor mats. Should not need a new vehicle for several years.

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  • 1995_SC Can you still get some of the tax credits under the new program?
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