Used Car Prices Drop 3% in Feb as Interest Rates Ease

Used Car Prices and Interest Rates Declined in February

According to a recent report from Baird, the used vehicle market experienced a notable shift in February, with retail prices falling 3% year-over-year based on the used car CPI index. Simultaneously, interest rates on used car loans saw a significant decrease of 60 to 70 basis points compared to the same period last year.

Overall Market Situation

The market presented mixed signals. While retail prices softened, wholesale prices tracked by the Manheim Used Vehicle Value Index increased by 4% year-over-year in February. Preliminary data from vAuto indicated a 6% rise in used vehicle retail sales for the month, although historical revisions suggest the final figure may be closer to flat or a low single-digit increase. Data from Bankrate confirmed that interest rates on 48-month used car loans were down 60-70 basis points from the prior year.

Impact on Major Retailers

Major used car retailers reflected these complex market dynamics. CarMax reported an average selling price of $26,383 in its most recent quarter ending November 2023, a slight increase from $26,153 in the prior year's quarter. Carvana reported an average selling price of $25,416 in its latest quarter ending December 2023. CarMax is scheduled to report its fourth-quarter earnings in April, with Baird anticipating potential upside to consensus sales estimates.

Summary

The used car market in February was characterized by falling retail prices and lower financing costs, which may have stimulated sales volume. However, rising wholesale prices suggest underlying demand remains firm. Investors will be closely watching upcoming earnings reports from major retailers like CarMax for further insight into consumer behavior and profitability.

FAQ

Q: How much did used car retail prices change in February?
A: Used vehicle retail prices decreased by 3% year-over-year in February, according to the used car CPI index.

Q: What was the trend for interest rates on used car loans?
A: Interest rates on 48-month used car loans were 60-70 basis points lower than the previous year.

Source: Investing.com