Wholesale Used Car Prices Fall While Retail Prices Remain Elevated
A couple of months ago, we reported on the decline of wholesale used car prices but cautioned you not to get too excited about getting a killer deal on your next purchase. Now, The Hill has more news on the subject, and, unfortunately, it’s not all that great for car buyers.
The Hill reported that the “wholesale price of used cars is falling off a cliff while the retail prices that car shoppers are paying are way up.” As it rightly points out, this seems to indicate that dealers are making more money while buyers are still paying through the nose.
The Manheim Index showed a 2 percent decline in used car prices between September and October and a 10.3 percent decline over the last year. Luxury vehicles and pickup trucks saw larger than average declines of 12.3 and 8.4 percent, respectively.
At the same time, retail prices for used cars have climbed 7.2 percent since last year, meaning dealers are keeping the extra profit and may be egging on inflation in the used car markets. Claudia Sahm, a former Fed banker, told The Hill that inflation is driven by prices set by businesses, not by some overarching authority on pricing. Unfortunately, if companies want to charge more, that’s the price consumers will see.
The bright spot in this report is that the distance between wholesale and retail pricing could shrink as dealers start to sell some of their overpaid-for inventory. There’s typically a lag time while dealers’ selling prices adjust to new wholesale prices, as they’ve paid more for cars that are now selling for less and need time to move the inventory.
Inventories are still short nationwide, which will prevent a major collapse in prices on both the wholesale and retail sides of the house. Prices are expected to remain higher than usual for some time, so it could be a year or more before things stabilize.
[Image: cleanfotos via Shutterstock]
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