But two new reports indicate that things may be starting to cool off.
Wholesale used car prices — what car dealers pay for the cars they sell to customers — fell in the first two weeks of July, while used vehicle inventories at dealerships increased, according to Cox Automotive.
In addition, the retail price of used cars — the amount consumers pay — has continued to increase, but at a slower pace over the past month, according to a separate Cox Automotive report. While it’s not certain yet, Cox Automotive analysts think retail prices will start coming down over the coming weeks.
Getting all the way back to normal will still take a long time, however, said Charlie Chesbrough, a senior economist at Cox Automotive.
The average price of a used car in the United States passed $25,000 for the first time ever at the end of June, a 26% increase from the year before and up 29% from two years ago.
Wholesale used car prices are also beginning to taper off. According to a recent Manheim Used Vehicle Value Index report, wholesale used car prices, overall, are still up almost 25% compared to a year ago. But, in the first weeks of July, prices dropped 1.7% compared to the month before.
These price comparisons are statistically adjusted for the differing mix of vehicles sold and for normal seasonal fluctuations, according to Cox.
“The latest trends in the key indicators suggest wholesale used vehicle values will continue to see a similar amount of depreciation in the days ahead,” the report said.
Manheim, a subsidiary of Cox Automotive, is America’s largest seller of wholesale used vehicles to auto dealers.
While the used car market is no longer at a full rolling boil, it will take some time for ordinary car shoppers to notice a difference, Chesbrough said.
“This frenzy to acquire inventory is backing off a little bit so the price is starting to come down a little bit,” Chesbrough said. “That generally means that, four to eight weeks from now, on the retail side, we should see the froth come down a little bit, a little bit less upward pressure.”
Used car prices still aren’t expected to return to anywhere near what they were before the coronavirus pandemic anytime soon, he said.
“My sense is that given the supply shortage on the new [car] side, we’re looking at a used market that’s going to be constrained for supply for the foreseeable future,” he said, “and those prices are going to remain elevated as a result.”