Since the beginning of 2022, used car prices have been rallying amid strong demand coupled with production challenges and a low supply of new cars. The supply chain issues in the automotive industry have been aggravated by supply chain instability exacerbated by the Russia-Ukraine war. According to research by CoPilot, in the pre-pandemic era, 76% of used vehicles were sold for less than $25,000. But now only 35% of used vehicles fall in that price range. According to the U.S. Bureau of Labor Statistics data, the consumer price index (CPI) for used cars and trucks jumped 40.5% year-over-year.
However, due to slowing consumer demand, the prices of used cars have finally started to decline. The number of used vehicles sold by dealers declined in March by 15% year-over-year, based on the estimates by Cox Automotive. The decline in demand for used cars is expected to keep certain used car companies under pressure in the near term due to their deteriorating fundamentals and bleak growth prospects.
