Used-car prices are projected to continue falling in 2023 as new-vehicle inventory rises and the market cools off.
A J.P. Morgan report predicts that prices will drop 10% to 20% over the coming year after likely peaking this past January. New-car prices are projected to decrease 2.5% to 5%.
The report by the data analytics firm cites the Manheim Used Vehicle Value Index, which shows that the prices dealerships pay for models at auctions hit a high in January and fell throughout this year.
“There are some glimmers of normalization, with prices finally easing somewhat, though conditions remain far from normal,” said J.P. Morgan Lead Automotive Equity Research Analyst Ryan Brinkman. “Looking ahead, we expect much less moderation in new vehicle prices than in used vehicle prices.”
Both new and used car prices soared during the pandemic as supply-chain scarcities, particularly for chips, shrank new-car inventories. Some used models’ value appreciated and they sold for more than their MSRP when new.
The report said that the average new-vehicle price in the U.S. was elevated 6.3% year-over-year in September. Average used-vehicle prices were up 42.5% that same month compared to February 2020, just before the pandemic emerged in the U.S.
Lower prices may be offset next year, though, by rising interest rates, which increase loan amounts, and by falling consumer confidence.
Originally posted on Auto Dealer Today