The vehicle prices continued on a downward trend in July, marking the most significant decrease in the Consumer Price Index (CPI) over the last year. This downward trend is a sign of the car market returning to a more “normal” state after the inflation caused by the pandemic. Used car prices fell by 2.3% in July compared to the previous month and by 10.9% from the prior year. On the other hand, new car prices experienced a 0.2% decrease in July and a 1.4% decrease from the prior year. Despite these decreases, used car prices are still 16.9% higher than they were in July 2019.
In contrast to the skyrocketing prices seen in 2021 and early 2022, prices paid for used vehicles have now dropped by 19.4% from their peak in February 2022. This decline is attributed to a buildup in inventories, leading to lower prices particularly in the used car market. The normalization of inventory levels in the new-car market has been a major factor influencing these trends. As new car prices decrease, values of newer used vehicles have also declined correspondingly.
## Impact on Dealers and Manufacturers
This continued downward pressure on vehicle prices is a positive development for buyers, while dealers may be feeling a slight pinch due to the decrease in prices. However, major automakers like Ford, GM, and Toyota have reported strong sales at the dealer level despite the falling prices and rising inventories. GM, for instance, expects only modest drops in average transaction price. The Manheim used vehicle value index (MUVVI) also experienced a slight increase in July, indicating a rising demand for used cars. This increase in demand can be attributed to a smaller quantity of leased vehicles entering the used car market.
## Future Outlook for Used Vehicle Prices
The question that remains is whether this increase in used vehicle prices will be a temporary blip or a sustained upward trend. As Manheim’s analysts suggest, the lower quantity of leased vehicles entering the market may continue to push prices higher. It will be interesting to see how the market evolves in the coming months and whether the downward trend in vehicle prices will continue.
In conclusion, the downward trend in vehicle prices, particularly in the used car market, reflects a return to normalcy in the industry after the inflation caused by the pandemic. While this trend is positive for buyers, it may present challenges for dealers. It will be important to monitor how the market adapts to changing inventory levels and demand for both new and used vehicles.
By Pras Subramanian, a reporter for Yahoo Finance. Follow him on Twitter and Instagram for the latest updates in the financial and business world. Stay informed with Yahoo Finance for in-depth analysis of stock market news and events impacting stock prices.