Used car prices drop for second straight month
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Used car prices in the U.S. declined in May for the second month in a row, providing a tiny bit of relief to those in the market for a new ride.
The latest Manheim Used Vehicle Value Index fell to 224.5 for last month, representing a 2.7% drop from April's 230.8 reading and 7.6% lower than a year ago.
Used car prices dropped for the second month in a row in May after rising the first three months of the year. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
The apparent downward trend is welcomed by would-be buyers in a market where prices for both new and used vehicles remain painfully high after the COVID-19 pandemic fueled demand and brought shortages. The index rose throughout the first three months of 2023.
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"Price erosion continued in May, with another month-over-month drop in the index bringing it 0.3 points below our January result," said Chris Frey, senior manager of economic and industry insights for Cox Automotive. "Taking a longer view, May’s year-over-year decline accelerated from April and March; however, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year."
New and used car prices both surged after the pandemic hit the U.S. amid soaring demand and production woes. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
Frey warned would-be buyers not to become too optimistic about the possibility of substantial declines in pricing.
"Two consecutive reads in either measure do not a trend make, as used retail inventory is still below last year, and that tends to keep buyers at the auction, supporting prices," he added.
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With new car prices at an all-time high and interest rates on the rise, Americans are keeping their vehicles longer than ever. The average age of US cars on the road hit a record 12.5 years this year according to S&P Global Mobility, as more drivers balk at the cost of replacing their vehicles.
Americans are keeping their vehicles longer than ever to put off replacing them with pricey alternatives. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
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Since the COVID-19 pandemic, used vehicle prices have surged around 40% to an average of nearly $29,000. With the average auto loan rate sitting at 11%, the typical monthly payment for a used car is now $563.
The Associated Press contributed to this report.