Understanding the rising risks that inflation will be more persistent than seemed likely just a couple of months ago takes looking at what's going on in the used car market.Used cars are just one of many types of durable goods that benefited from stabilizing supplies in the second half of 2022. But they are not poised to play the same role in 2023, because supply chains can only heal once.Since July, durable goods prices have fallen 2.
"But when things start turning up, and it looks like things might get better, it's almost like a feeding frenzy. That's what looks to be happening now. A lot of these dealers are jumping back in the wholesale market," Frey says.That rebound is happening alongside more depressed supply, in part because of a lingering pandemic effect: Leases became less popular, leaving fewer instances of expiring ones to funnel into the used car market.
Goldman Sachs also points to smaller flows of chips and other issues that stem from China's COVID-19 wave that "contributed to a 10% pullback in US auto assemblies since October." "Coupled with strong demand, this production shortfall likely forced some consumers into the used car market, bidding up prices accordingly," economists at the bank wrote in a note on Friday.Goldman said it now expects used car prices to fall 7.5% on a year-over-year basis in December 2023, versus the 15% decline it previously anticipated.The goods sector in the months ahead may not be as reliable of a contributor to the disinflation trend that appeared to be underway .
"If dealers are able to pass along these higher used vehicle acquisition costs to the consumer, we may see some uptick" in used vehicle prices, says Tom Kontos, chief economist at Adesa, the used car auction dealer owned by Carvana.
tbh I would not buy a vehicle which had to have some software workaround for reduced chip availability. can u say pedal problems?
Takes my car a couple of months to shift into reverse too.
🤡