Used car prices plunging: EVs hit the hardest
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Used vehicle prices are plummeting. That's good news if you're in the market for a new ride, bad news if you're counting on a trade-in to do it.
Why it matters: Used car prices were a major driver of post-pandemic inflation.
The big picture: Average wholesale prices declined to $17,934 in June, down 8.9% versus a year earlier, according to Cox Automotive's Manheim Used Vehicle Value Index.
- That's the 22nd straight month of year-over-year drops.
- Wholesale price trends typically translate into similar retail price movement.
The price declines are hitting EVs the hardest as choices proliferate and some consumers balk at the chance to go electric.
- Used EV prices are down 16.6% over the last year.
- The average price of a 2023 Tesla Model 3 with two-wheel drive has plunged 40% in a year, according to Manheim.
Between the lines: Vehicle inventories have recovered after the pandemic temporarily ravaged supply chains, which limited automotive production capacity and caused prices to spike.
- Now, after years of enjoying massive price increases, dealers are ramping up incentives on new vehicles — which has a "waterfall" effect causing used vehicle values to recede, Cox Automotive chief economist Jonathan Smoke said on a conference call.
- Overall, sedan prices are down 11% over the last year, while SUV prices are down 9.3% and pickup prices are down 8.3%.
Reality check: None of this is a welcome development for people looking to trade in a vehicle they're still paying off.
- Upside-down loans — where the vehicle is worth less than the person owes — hit an all-time high of $6,255 in the second quarter, which is up 39% from two years ago, according to data released Wednesday by car research site Edmunds.
What we're watching: June's Consumer Price Index comes on Thursday, giving us more insight into how used car prices are factoring into inflation.
Go deeper: Tesla's declining vehicle deliveries signal it's losing EV dominance
Disclosure: Cox Automotive is owned by Cox Enterprises, which is the majority owner of Axios.
