Have used-car prices peaked? Some experts suggest they have, but the market may take a while to get back to sane.
“Vehicle prices show signs of normalizing,” according to the most recent AutoTrader survey. What does that mean? It means the average price of a new car is $55,469 (an 18-per-cent increase over last year’s average) while the average price of a used car is $37,928 (up 32 per cent over last year).
… If this is our new normal, the car market remains insane, and doesn’t look to be returning to something recognizable anytime soon. According to George Iny, president of the Automobile Protection Association (APA), the only reason new car prices aren’t soaring even higher is that they carry a published MSRP. “Even without discounting, and almost no automaker rebates, the MSRP anchors the new vehicle price to a considerable extent. Based on that number, the average monthly payment for new with taxes and interest around 5 per cent is $900 with zero money down.”
Iny notes that used prices don’t even have that kind of governor on them. “The price for a low kilometre three-year-old lease return is currently almost equal to new; sometimes the difference is less than $1,000.” That blink-and-you’ll-miss-it difference in cost is being paid by buyers who don’t want to wait for new inventory. Iny agrees with Akyurek that used prices have likely peaked, as the market can’t sustain used vehicles costing the same as a new version for long.
Buyers are hardly the victims, however. The APA’s research points out that sometimes, car buyers are their own worst enemies. “Overbuying seems almost universal. Almost every personal-use buyer could manage with something in the class of a Honda Civic or a Hyundai Venue, but that is not where the market is heading.” Instead, demand for SUVs and pickups remains high. Iny points out that, “Even EV buyers have migrated from early ‘sensible’ models like the Leaf and Volt to fantasy-class purchases like the F-150 Lightning and Teslas.” He says manufacturers that tried to offer more rational choices have been met with disinterest.