The average used car in America sold for $26,068 in February – down 1.7% from January’s price.Both new and used car prices decreased during the month – great news for a driving public who had grown accustomed to soaring prices for all kinds of cars.
However, the good news in the used car market may not last.
KBB analysts think the market is headed for a price flip, where used car prices rise as new car prices fall.
“Used-vehicle sales have been up significantly, causing inventory to fall quickly in recent weeks and leaving dealers with especially tight inventories for the tax refund and spring selling season,” said Charlie Chesbrough, Cox Automotive senior economist.
Cox Automotive is the parent company of Kelley Blue Book.
“Used prices may fall further, but it seems unlikely that a massive decline will happen given the supply situation,” Chesbrough says.
Used-vehicle sales are typically strongest when consumers receive tax refunds, which are often used to support vehicle purchases.
The total supply of used vehicles on dealer lots stood at 2.07 million units at the close of February. That was down from a revised 2.19 million at the end of January and down 21% from February 2021.
The wholesale prices dealers pay for the used cars they sell began to rise last month. When dealers pay more for cars, they pass those higher prices on to shoppers.
Meanwhile, the prices of new cars are now falling steadily, and they are becoming more affordable in general last month.