Beth Weaver, who owns a Buick GMC car dealership in Erie, Pennsylvania, witnessed something that hasn’t happened much since 2020 this summer. Demand for her is weak enough that she and her competitors are moving some cars off the lot at deep discounts.
Automobiles have been in high demand and in short supply for many years, partly due to production disruptions during the pandemic.but stock The economy is slowly recovering and people are becoming less enthusiastic about buying new cars. So instead of rising inexorably, car prices are finally slowing.
“It’s not the last few years, it’s not the fall,” Weaver said. “Interest rates are certainly putting pressure on demand.”
Cars were the main driver of inflation when inflation began to kick in in 2021, but prices have remained volatile since then. Used car prices have surged after slowing last year. wholesale level But it’s falling again, which could put a lot of pressure on inflation.
“My current view of the car, and what to expect in the coming months, is normalizing,” said Jonathan Smoke, chief economist at Cox Automotive. “We are rapidly approaching a stage where supply and demand are more in balance.”
Omail Sharif, founder of Inflation Insights, expects second-hand car prices to fall sharply in June, pushing overall inflation down. He expects new car prices to remain flat in June, but doesn’t rule out a complete decline.
Sharif believes new car prices may continue to fall, but may become less dramatic in the second half of the year. However, used cars are still something of a wildcard, as there are still relatively few vehicles in circulation. Firms won’t produce as many cars in 2021 and 2022 due to production disruptions stemming from shortages of semiconductors and other components. This means that there are fewer used cars available today.
“Supply is still very short and we haven’t seen much improvement,” Sharif said. “As such, prices are expected to fall significantly over the next three to four months, and similar price declines could once again draw consumers in, similar to what happened in early 2023.”
Weaver said there is already some divergence between the two markets. Used car buyers are still trying to buy, but many are desperate. For example, a company needs more vehicles, or someone is considering replacing a vehicle that failed inspection. New car buyers have a wait-and-see attitude.
“The fact that it’s in stock creates so much urgency,” she said, explaining that she had one particular model of car on her lot last year and it sold quickly. There may be six this year, but they are of little interest.