After rocketing early in the pandemic, the cost of used cars dropped 8.8% year-over-year from December 2021 to December 2022, according to the Consumer Price Index.
The price of used cars in the CPI continued to slide for the sixth straight month, having fallen 2.5% between November and December.
A private index, the Cox Enterprises-owned Manheim Used Vehicle Value Index (MUVVI), has reflected similar declines in the price of used cars. On that index, the price of used cars dropped 1.9% from November to December and dropped 13.1% year-over-year between December 2021 and December 2022, according to a press release from Cox Automotive.
When adjusted for factors including seasonal pricing and mileage, the decrease was even starker at 14.9% year-over-year, the biggest such decrease in the history of the MUVVI, which is indexed starting in January 1997. However, the adjusted index also showed a slight increase of 0.8% from November to December 2022.
The sustained fall in the price of used cars comes after record increases during the pandemic. Part of the increase in used car prices was fueled by a rise in new car prices, driven by a shortage of computer chips used in modern, “smarter” vehicles.
“At one point it seemed that everyone who was going to buy new ended up buying used. … There was nowhere for these prices to go but down,” Auto Lenders Executive Vice President Greg Markus told CNN.
Cox experts used its data to illustrate the volatility of the used vehicle market over the past year.
Cox Automotive Senior Manager of Economic and Industry Insights Chris Frey explained on a quarterly insights call, “While that [14.9%] decline was the largest in the series’ history, compare that drop to the overall 88% increase in the 21 months from April 2020 to January 2022,” according to Automotive News.
The price of used cars is not projected to drop back to 2019 levels, but should reach equilibrium as 2023 progresses.
“These last three years have been extremely volatile for the market, and these declines follow record increases. In December 2021, we were up 47% year over year. The pre-pandemic levels will likely never return, but all indicators point to reaching equilibrium in the second half of 2023,” said Cox Automotive Chief Economist Jonathan Smoke in the Cox release.
