Used-car costs are nonetheless sky-high — however they might be easing

A pedestrian walks previous an authorized pre-owned automobile gross sales lot in Alhambra, California on January 12, 2022.

Frederic J. Brown | AFP | Getty Photos

Wholesale used-vehicle costs fell in February from January, an indication that whereas costs stay close to report ranges, the surge in U.S. used-car costs could also be easing.

Cox Automotive stated on Monday that its Manheim Used Car Worth Index, which tracks costs of used automobiles offered at Manheim’s U.S. wholesale auctions, declined 2.1% in February from January.

Nonetheless, on common, used automobiles are traditionally costly. The index is down from its report excessive in January, however it stays up 36.7% from the year-earlier interval.

Covid-related provide chain disruptions — particularly, an ongoing international scarcity of semiconductor chips utilized in automobiles, vans and SUVs — have pressured automakers to restrict their manufacturing of recent automobiles. That, in flip, has triggered a surge in used-vehicle demand and costs over the previous 12 months.

Whereas almost all used automobiles are costlier than they have been a 12 months in the past, the will increase have not hit all classes equally. Cox’s information exhibits that whereas costs of compact automobiles and vans soared 44.9% and 48.4%, respectively, in February 12 months over 12 months, costs of used pickups have been up simply 24.8%.

The discrepancy between vans and compact automobiles displays the state of new-vehicle inventories. Automakers together with Ford Motor, Basic Motors, and Chrysler dad or mum Stellantis have prioritized manufacturing of their extremely worthwhile (and huge-selling) pickup vans over less-profitable compact fashions amid the chip scarcity.  Which means shoppers hoping to purchase a brand new compact automobile or SUV usually tend to be out of luck, and usually tend to search an identical mannequin on the used market than consumers trying to purchase a brand new truck.

However even pickup-truck manufacturing hasn’t been immune from disruptions. All three of the massive Detroit automakers have needed to trim manufacturing of vans at instances over the previous 12 months. And it isn’t over: Ford final week confirmed that it has as soon as once more been pressured to chop manufacturing of its Tremendous Obligation pickups and enormous SUVs due to semiconductor shortages.

Efforts are underway to spice up manufacturing of chips within the U.S. and world wide. Chipmakers together with Intel and TSMC started constructing new semiconductor vegetation within the U.S. final 12 months.

Some automakers aren’t ready for these factories to stand up and working, although. Ford stated in November that it’ll companion with chip provider GlobalFoundries to spice up its product entry. And Basic Motors has begun working with a number of chipmakers on new designs that may significantly cut back the product want in future automobiles.

Provides of automotive semiconductors ought to start to enhance later within the 12 months as new factories start working, which is anticipated to having the knock-on impact in lowering demand and costs for used automobiles.

Within the close to staff, although, Russia’s invasion of Ukraine could exacerbate the chip scarcity. The international locations are vital suppliers of neon fuel and palladium, two commodities crucial to chip manufacturing.

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