Used Car Prices Soar by the Most in 14 Years

As inflation continues to drive consumer costs, used car prices saw the largest February increase since 14 years.

Wholesale used-vehicle prices increased 4.1 percent from January through the first half of this month, signifying the largest February increase since 2009’s full-month 4.4 percent gain, according to the Manheim Used Vehicles mid-month Cox Automotive Value Index

This is just one month after the markets experienced a dramatic rise in Prices for used carsAccording to the Manheim Used Vehicle Value Index.

The used vehicle index increased to 234.0, a decrease of 7.3 percent over February 2022. Seasonal adjustment was a part of the gains.

The first half of February’s non-adjusted change in price rose by 3.4 percent compared to January. However, the unadjusted prices were down 5.9 percent year over year.

After a peak at 257 in early 2022, the index fell 15%. However, it has increased 7 percent since November.

Inflation is still a major concern

While inflation rates are continuing to fall, there are concerns that the Federal Reserve’s campaign for a 2 percent official inflation rate target by increasing borrowing rates could cause economic collapse in the second half.

In the meantime, it is attracting considerable attention that Fed policymakers are pushing to increase interest rates by 50 basis points at their March policy meeting. This will help lower costs even further.

The price of used cars has long been used by U.S. market watchers and by the Fed as a prime benchmark for observing the rate of inflation.

One of the concerns surrounding the Fed’s disinflationary policy has been the spike in wholesale used vehicle prices.

Although the latest Consumer Price Index (CPI) report showed a slight decline in used vehicle prices, a sizable bounce is expected in this category due to a time lag over the next few months, according to analysts.

The Manheim index, which is a real-time indicator, shows that the future CPI data for Used Cars and Trucks will likely increase as prices have a two month lead.

National Auto Loan Defaults to Hit Soon

Used car prices are increasing as consumer auto loans hit a new record of over $1.4 trillion, though many borrowers are beginning to falter on their loans.

Consumers are increasing their auto-loan obligations at a moment when the borrowing rates for car loans is at its highest point.

The auto-loan crisis could turn into a major storm, as the rate for severely indebted loans has reached levels not seen ever since the Great Recession.

It is feared that many people who bought cars at a time of low interest rates and pandemic-era monthly government handouts of $1,000 will face financial ruin if—or when—recession hits.

“People are not paying their car loans. Auto loans delinquent (overdue) by MORE than 60 days are now up 26.7 percent from a year ago. Not a crisis just yet but watch this trend closely,” CarDealershipGuy, an industry observer, said that a Tweet last month