This spring, consumers who want to use their tax refunds to buy a vehicle may be dissatisfied with the market. The cost of living has increased.
The used automobile market is sending up price alerts for the future, indicating an end to the price drop that began in the fall.
Why Used-Car Prices Rise?
The auto auction house Manheim had the greatest monthly increase in vehicle prices for February since 2009. The increase was 4.3%. Black Book, another pricing aggregator, reported a weekly increase of 0.46 percent for the week ending March 11. This was the highest weekly gain for wholesale used-car prices since November 2021.
While the most recent consumer price index indicated used-vehicle prices declined 2.8% in February compared to the previous month and 13.6% over the previous 12 months, this data would not have reflected the higher wholesale pricing car dealers began paying in February.
Automobiles purchased by Americans in that month were presumably acquired by dealers in December and January when wholesale costs were cheaper.
March and April will be an entirely different story. These automobiles will reflect the increased costs that dealers have encountered since February. In the last four weeks, the average price of a used car has increased by $700 and currently exceeds $40,000.
January and February, normally slow sales months, exhibited unexpected growth in sales this year. Used-vehicle retail sales increased by 5% in December compared to the same month a year ago, and by 16% from December to January.
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How Will This Affect Inflation?
Experts speculate that these sales were bolstered by a generally mild winter, lower inventory levels, a decline in overall pricing, and likely efforts by consumers to purchase models before financing rates increased again.
Due to economic upheaval and the likelihood of a recession, “people are budget-conscious, and a used-car payment may be less than a new car payment,” said Mike Trudeau, executive vice president of business development at auto transport company Montway Auto Transport.
Used automobiles account for 4.5 percent of the index’s core rate, which excludes changes in food and energy prices, and are a major factor in the deceleration of inflation.
The core rate, which the Fed closely watches as a more accurate inflation measure since it excludes volatile costs, has accelerated once more. In February, it increased by 0.5%, compared to 0.3% in November, 0.4% in December, and 0.4% in January.
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