Have you purchased a new vehicle lately?
Maybe you replaced an older work truck or updated a fleet for your business. Perhaps you’ve changed up your personal ride to improve gas mileage on your daily commute or bought that first car for your youngster.
If so, you might know where I’m headed. Sticker shock. It’s been real in the car industry.
I’ve been through the drill lately. Anecdotally, dealership insiders say car values have been up 20%-30% more than typical.
According to a used car price index by car buying app CoPilot, it’s even higher. Think 42%. That’s $9,375 above the projected normal value levels for every used car purchase on average. The climb started in February 2021, the CoPilot index shows, and it appears to have peaked and begun leveling off throughout this year. However, we’re still near all-time highs, at an average of $31,450 per sale, according to the index, billed by CoPilot as the first of its kind for used cars.
Whew. That’s tough to swallow.
With the new-car inventory struggling through supply shortages, primarily semiconductors, that’s created a wonky market. I’ve heard multiple anecdotes of late-model cars, or even a few years older, commanding prices equal or greater to the current models – those that are often on back order for consumers. For those car owners, that fits the stock market narrative to “sell high” – but where do you “buy low”?
One could argue that’s the new car market – if you can get your hands on one.
New car prices are up, but comparatively by only 13.5% in the 12 months ending May 2022, according to Kelley Blue Book data.
Still, it’s not a strong argument because prices are just shy of the record high average transaction values collected by KBB: $47,202, notched in December 2021. In May, it was a little over $47,000. So, in just six months, two record highs.
Ouch, says the pocketbook. Unless you could avoid the car market altogether.
A June Fortune article connects the car market movement to inflation activity. In short, the higher-priced new and used car market has been a key, ahem, driver of rising inflation.
Though supply is down, demand isn’t, pushing those prices up. So, I guess most can’t avoid the market. Cars are often circumstantial purchases.
One automotive research firm, iSeeCars.com, has localized these pricing trends – even down to the make and model. According to an analysis of used car sales in May, iSeeCars found prices increased 16% or $4,957 on average in Springfield over the last year.
What vehicle would you guess had the greatest change?
Not the Hyundai Tucson, Chevrolet Colorado, Honda Accord or Toyota Camry – though those are all in the top five. Leading that pack is the Ford Mustang, according to iSeeCars, with a whopping 61% increase in price and selling at an average $19,375 higher in May 2022 compared with May 2021. Those other models posted increases between 33% and 42%.
If you own one of those, maybe now is the time to sell.
There is some good news on the horizon, too. Demand is easing, which should settle down all these crazy numbers.
Used retail sales declined 13% in April from March, according to the Manheim Used Vehicle Value Index cited in a CNBC report.
If that trend continues, prices should fall back to lower levels. But I can’t speak for Ford Mustang shopping in the Springfield market. That pony’s too hard to predict.
Springfield Business Journal Editorial Vice President Eric Olson can be reached at firstname.lastname@example.org.
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