Used car prices in the U.S. declined in May for the second month in a row, providing a tiny bit of relief to those in the market for a new ride.
The latest Manheim Used Vehicle Value Index fell to 224.5 for last month, representing a 2.7% drop from April's 230.8 reading and 7.6% lower than a year ago.
The apparent downward trend is welcomed by would-be buyers in a market where prices for both new and used vehicles remain painfully high after the COVID-19 pandemic fueled demand and brought shortages. The index rose throughout the first three months of 2023.
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"Price erosion continued in May, with another month-over-month drop in the index bringing it 0.3 points below our January result," said Chris Frey, senior manager of economic and industry insights for Cox Automotive. "Taking a longer view, May’s year-over-year decline accelerated from April and March; however, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year."
Frey warned would-be buyers not to become too optimistic about the possibility of substantial declines in pricing.
"Two consecutive reads in either measure do not a trend make, as used retail inventory is still below last year, and that tends to keep buyers at the auction, supporting prices," he added.
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With new car prices at an all-time high and interest rates on the rise, Americans are keeping their vehicles longer than ever. The average age of US cars on the road hit a record 12.5 years this year according to S&P Global Mobility, as more drivers balk at the cost of replacing their vehicles.
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Since the COVID-19 pandemic, used vehicle prices have surged around 40% to an average of nearly $29,000. With the average auto loan rate sitting at 11%, the typical monthly payment for a used car is now $563.
The Associated Press contributed to this report.
