The semiconductor chip shortage and other related supply chain constraints have forced automakers to slash production of new vehicles, which has, in turn, affected the used vehicle market in a big way as well. For months now, used car pricing has reset its own record time and time again, passing $27k in November and cresting the $28k mark in December, making used cars a better investment than other hyped assets. However, there have been signs that used car pricing was going to level off at some point in the near future, as supply has steadily increased while demand has decreased. Now, that has come to fruition, according to the latest data from Cox Automotive.
After used vehicle prices averaged a record $28,205 in December, January saw a bit of a dip as that average declined to $27,633 in January. This coincided with an increase in the number of unsold used vehicles on dealer lots, from 2.38 million to 2.55 million, while days’ supply improved from 51 to 56. That latter figure has been steadily growing since April when it bottomed out at 30 days’ supply, and January’s number was 26 percent better, year-over-year.
“Used vehicles are starting to see some inventory build-up ahead of the prime selling season as tax refunds come in,” said Charlie Chesbrough, Cox Automotive senior economist. “The inventory volume and days’ supply are both above last year, though sales remain low. Spring should see strong demand.”
Used car prices remain high, however, which could put a damper on such a recovery. January’s average is still 29 percent higher than last year, though pricing decreased with each passing week last month. Inventory, on the other hand, is greatly dependent on price range. The cheapest used vehicles – priced under $15,000 – had the lowest days’ supply of 40, followed by 49-57 days for cars priced between $15,000-$25,000, while vehicles priced over $25,000 had between 61-69 days’ supply.