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Marc Levine in Florida has one word to describe his recent two-month quest for a car: “disgusting.”
The Palm Beach-area resident started car shopping in December, hoping to find good prices on new cars languishing on the lots at the end of the year.
There were no bargains. Instead, he heard the expression “MSRP plus” plenty of times: prices anywhere from $2,000 to $5,000 above sticker price.
Levine turned to the used-car market, finally landing in February on a used dark gray 2020 Mercedes E Class with 6,300 miles on it, feeling OK about paying less than $50,000 for it.
Some compromises were made: The car had all the safety features the family wanted, but its light interior, potentially showing dirt a little more, was a bit concerning. But “the positives outweighed the negatives,” he said.
“It was actually very challenging, and it was draining to me,” Levine said. “I really didn’t think it was going to be this hard.”
Still ‘much higher’
An uptick for wholesale used-car prices in February has put retail used-car buyers on notice just as the market is about to heat up, buoyed by tax-return checks.
Used-car prices peaked around April 2022, and they have been trending slightly lower, said Jessica Caldwell with Edmunds.
The supply of new vehicles, hit hard by a chips shortage and other supply-chain problems in the two years from the start of the pandemic, has improved. The scarcity of new cars had pushed buyers like Levine toward used cars.
Still, there’s question that from a historical perspective, used-car prices “are still much higher,” she said.
According to Edmunds, the average price of a used car was $28,106 this year, up 38% from an average of $20,409 in January 2020.
That compares with an average $48,000 for a new car.
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That uptick in the February wholesale used-car market will trickle down to retail prices in a few weeks, and is also flashing some worrying signs for inflation.
Typically dealers acquire vehicles from auctions and take anywhere from about four to six weeks getting the vehicles ready for sale, including time spent shipping the vehicles as well as fixing and cleaning them as needed.
“Used-car retail inventories are declining more quickly than we expected,” said Chris Frey, senior manager of economic and industry insights at Cox Automotive.
“I’d say if they remain low, it will plateau soon,” Frey said.
Prices could soften after late April or so, as new-car inventory builds back. While some shortages are still plaguing auto makers, the situation is far better than last year’s.
Rivian Automotive Inc.
RIVN,
last week reported mixed quarterly results and announced weaker production guidance, pinning those on manufacturing snags.
Used-car prices fell from July through January, one of the reasons inflation moderated from a peak in June.
Cars in general have gotten more expensive, as they got larger and loaded with infotainment, safety and autonomous-driving features.
U.S. buyers for years have gravitated toward SUVs and pickup trucks, which are more expensive than sedans. Rising prices are hitting just as deals and zero-percent incentives all but dried up.
Some relative deals for new vehicles have returned, Edmunds’ Caldwell said. “No zero percent (interest rate), but 4% for 60 months, which is at least something.”
As for Levine, he’s about to embark on another car purchase, this time seeking a new car for one of his sons, replacing a 9-year-old vehicle. “I want to get more safety features for him,” Levine said.
As for returning to car shopping again, “I don’t want to, but it’s part of a challenge right now. The car that we have now is on borrowed time.”
