The wholesale price for used cars decreased sharply in October while the price on the lot continues to rise for consumers. File photo UPI/Roger L. Wollenberg | License Photo
Nov. 7 (UPI) -- Car dealers are getting better and better prices for wholesale used cars, while raising sticker prices on the lot higher and higher.
Manheim's Vehicle Value Index reports used car prices dropped 10.6% below last year, including a 2% drop from September to October. The decrease was relatively low compared to what has been seen over the last several months. Yet it is still exaggerating the profits car dealerships are in line to make.
The wholesale price refers to the price a dealership pays a manufacturer or auction house for a user car.
As the wholesale price falls, used car sales are expected to continue falling as well. Manheim estimated a decrease of 9% between October and September, 13% in year-over-year decline. Looking at pre-pandemic numbers, used car sales decreased by 32% since October 2019.
Consumers are often being priced out of the used car market, even finding buying new to be a better value. New car inventory is at a low as manufacturers continue to rebound from the COVID-19 pandemic, some even considering approaches to marketing new models. Inflation and increased interest rates from the Federal Reserve have not helped the matter. Of course dealerships could pass along their savings to car shoppers, but Claudia Sahm, a former Federal Reserve banker, told The Hill they are not obligated to do so.
"They can make bigger profits," she said. "You're in a capitalist economy, so whether it's a small business or corporation, they get to decide when they pass a price increase or a price decrease on."
Consumer confidence in the present situation of the used car market dropped more than experts expected in October. The Conference Board Consumer Confidence Index declined by 4.9%, while it was predicted to fall by only 1.9%. The biggest factor in the decline was a 7.5% decline in positive responses to the present market situation.
"Consumers' expectations regarding the short-term outlook remained dismal," a release from the CBCC said. "The Expectations Index is still lingering below a reading of 80 -- a level associated with recession -- suggesting recession risks appear to be rising."
Surprisingly, consumers' plans to purchase a vehicle bounced back to their highest levels since July 2020.