The average used car price fell to $27,156 in the first half of December.
It was the first time since the spring of 2020 listing prices fell from the previous year, according to Manheim Market Insights for December.
“Used vehicle retail listing prices are starting to fall, likely due to softening demand,” said Mark Schirmer, Director of Corporate Communication at Cox Automotive during a presentation of the December report.
Higher interest rates and vehicle prices are causing the demand to fall. Entering 2023, vehicle affordability is expected to be the main issue. On the typical 72-month loan, interest rates are adding $2,854 to the overall cost of a used vehicle, with the total average financed amount now hovering above $ 29,000.
“It’s no wonder our recent vehicle affordability index continues to head in the wrong direction,” Schirmer said.
It’s no wonder our recent vehicle affordability index continues to head in the wrong direction.Mark Schirmer of Cox Automotive
“Rising interest rates are putting pressure on consumers and the market. The higher costs are forcing many consumers to make some difficult decisions. They are asking themselves, ‘How much cash should I put down. Should I finance or should I figure out a way to make a cash deal, or more importantly should I even be in the market at all right now.’”
Throughout 2022, the Federal Reserve has steadily increased its target rate to battle inflation. The Fed has moved it 425 basis points, the largest net increase in a calendar year.
While prices fell for the early part of December, they remain approximately $5,000 above the pre-pandemic level.
NIADA continues to monitor the market. Our independent automotive dealers stand ready to help consumers struggling with their personal budgets. Our BHPH dealers are there to help those severely effected by increasing costs. Our retail dealers continue to be a strong option for consumers looking for quality used vehicles at respectable and affordable prices.