Used-car prices in the United States experienced their largest monthly drop since the start of the pandemic, falling by 4.2% in June. This decline comes as a significant measure of inflation eases. The decrease in prices can be attributed to rising interest rates and greater discounts on new cars.
Chris Frey, senior manager of economic and industry insights at Cox Automotive, noted that buyers at auction seem to have taken an early summer break. While the retail inventory for used cars has improved in recent weeks, wholesale price movements are expected to be less volatile throughout the rest of the year.
Used-car prices have been a significant factor in core inflation, excluding food and energy prices. Core inflation has remained stubbornly high this year, despite a decrease in the headline inflation rate. According to Cox, consumer expenditure on automobiles—including new and used vehicles and auto parts—has climbed by 10% over the previous year.
Jonathan Smoke, chief economist at Cox, stated that the risk of recession remains elevated but is more likely to occur in the first three quarters of next year, depending on the Federal Reserve’s decisions regarding interest rates. Manheim, the largest auto auction and a subsidiary of Cox Automotive, has adjusted its forecast for a 1.1% decline in its used-vehicle price index in December.
