Inflation: New and used car prices easing as normalcy returns
The new and used car market in the US might be returning to a state of normalcy, following the latest government inflation data released Wednesday morning.
For the month of June, consumer prices for new autos were flat compared to May and up 4.1% year over year, with the yearly figure coming down compared to the prior month’s 4.7%. The used car market saw even more moderation, with prices down 0.5% for June, and dropping 5.2% year over year. Both of those figures for the used car market fell considerably compared to the prior month.
Car prices seem to be coming down faster compared to the broader economy, which saw overall CPI rise at the slowest pace since March 2021 as inflation showed further signs of cooling, up 0.2% in June compared to last month and up 3% year over year.
Looking at the dealer level, auto research firm Edmunds supplied new high-frequency data to Yahoo Finance looking at the average transaction prices paid by consumers across its dealer network, and data reflects what the government is seeing as well.
For the month of June, average transaction prices (ATP) for new cars rose 0.3%, and 4.5% year over year — very similar to what CPI is showing. And for the used market, Edmunds’ dealer data showed an ATP gain of 0.6% month over month but a drop of 3.7% year over year.
The used car market in particular seems to be moderating much faster than the new car market. Manheim’s used vehicle index, which tracks pricing across the company’s wholesale or auction market, saw prices drop the most since the pandemic began in early 2020. The used market did see a momentary blip higher in prices during the spring buying season, which is generally fueled by tax refunds, but is now back to trending higher.
Overall the auto market may be returning to a level of normalcy following a huge run-up in both new and used car prices during the pandemic. New car supply is trending higher as parts shortage and supply chain issues ease, and automakers are able to produce more of the cars new car buyers are interested in, namely trucks and new electric vehicles. The used car market is seeing prices ease as supply builds back up on lots due to lease returns, rental car turnover to the used market, and the effect of higher interest rates holding back sales.
“With supply slowly improving and demand holding steady, all indicators point to a return to more normal patterns of depreciation for the second half of 2023 and fewer significant declines,” Manheim's June report said.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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