Thu, 08 September 2022 | economy
According to the monthly Return to Normal indicator from vehicle-shopping app CoPilot, the used car market has reached its pinnacle after used car prices reached all-time highs throughout the COVID-19 pandemic and supply chain delays, and even stayed steady amid several interest rate hikes this year.
Most markets and brands have seen price declines following recent record highs. The price premium, or the difference between current listing prices and what the identical used automobiles would have been worth, is displayed by CoPilot's Return to Normal Index. This index accounts for the COVID-19 epidemic and other extraordinary events of the preceding two years. This gives American consumers a distinct indicator of the relative overvaluation of cars and creates a new economic barometer for the retail used car market.
Prices fell in August across all age groups, with the prices of 1-3 year old automobiles showing the most evidence of this trend. Since consumers have been turning to them as a replacement due to record-low new car inventories, nearly-new car prices have been near all-time highs for much of this year. However, they are now falling the quickest of any age group, down $715 (or 2%) to $41,545 in August. The Price Premium for these vehicles decreased the most by 7%, from $11,944 (or 39%) in July to $11,097 (or 36%) in August, the largest decrease of any age group.
With used SUVs and pickup trucks costing $8,092 (or 23%) and $8,638 (or 26%) above average, respectively, these remain the classes that are most closely associated with a return to average pricing levels. The average price of a used SUV, which is currently $43,222, has decreased over the last six months, while the average price of a used pickup truck, which is currently $41,469, has decreased over the past four months.
This general trend in the used automobile market is also reflected in electric and hybrid vehicles. Used electric and hybrid vehicle prices, which had soared alongside gasoline costs in the spring, sharply decreased this month as gas prices continued their steady slide. Between July and August, used electric car prices fell by 4% to an average of $64,306 while used hybrid vehicle prices dropped by 3% to $47,790.
Additionally, the average price of a used Tesla, which is sometimes regarded as a proxy for the market for electric vehicles, has decreased by 4%, or slightly over $3,000, since last month, to $67,324. Tesla prices are beginning to show early signs of softening after reaching an all-time high of 50% over anticipated normal in June. Prices fell to 43% above normal levels in August.
"Relief may finally be approaching after years of outrageous price increases in the used car market," stated Pat Ryan, CEO and Founder of CoPilot. "While we're still a long way from average costs in absolute terms, it's obvious that prices have dropped from record highs across the great majority of car sectors and brands. Customers who have waited months or even years to act in this unheard-of market should be prepared to do so now.
Ryan continued, "Automobiles are still moving quickly off dealer lots, but as days-to-sale tick up lately, dealers are cutting prices - by hundreds of dollars for nearly-new cars - to keep sales going in the face of rising interest rates and other economic headwinds that weaken demand. "The situation is developing, but we advise consumers to be ready to act quickly once they locate a vehicle that meets their requirements and to keep a watchful eye out for any potential price drops that may occur in the near future. Buyers frequently discover that they now have more negotiation power with the dealer.
However, some brands' pricing in August remained steadfastly close to all-time highs. A modest increase from the Price Premium of $8,012 over normal from last month, foreign brands were priced on average $8,105 (or 44%) above predicted typical levels. Used Volkswagens had the greatest Price Premium among international brands, costing, on average, $9,338 (or a staggering 57%) more than market rates.
Source: CoPilot