Used cars prices dropped in August for the first time in seven months after seven months in which they skyrocketed compared to 2020.
Figures from the Labor Department reveal that prices slipped by 1.4 per cent last month, posting the first decline since January. However, used car prices are still up 31.9 per cent from 12 months ago and as the global chip shortage continues to wreak havoc on the production of new vehicles resulting in supply not keeping up with demand in many cases, may remain high for quite some time.
Fox Business notes that used car prices were also supported by the flight from city centers to the suburbs and multiple rounds of stimulus checks. In addition, rental car companies have begun to restock their fleets after selling them off during the early stages of the pandemic.
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“Used car prices started to see a negative payback after the record-smashing rally over the past year,” noted Bank of America economist Alexander Lin.
The Federal Reserve added that the surge in used car prices serves as evidence that inflation is transitory and that prices will recede once supply chain disruptions are resolved.
3M chief financial officer Monish Patolawala says new vehicle production will decline 6 per cent year-over-year in the second half of this year due to the chip shortage. However, some analysts expect used car prices to remain relatively stable in the coming months.
If you happen to have a vehicle sitting around that you could do without, now could be the time to sell it. However, if you’re in the market for a used car, waiting for the chip shortage to end could be a wise move.
