- Many signals suggest that used car prices could be in the early stages of a long climb
- But dealers are paying less for used cars at auction, keeping a lid on price increases for now
The price of the average used car rose in July. However, there is a little bit of good news for car shoppers. Though the headlines are chaotic, one key indicator suggests that prices might not rise much in early fall.
Dealers paid less at auctions for used cars to restock their lots in the first two weeks of August.
We predict future used car prices, in part, by watching the prices dealers pay at auction. Kelley Blue Book parent company Cox Automotive also owns Manheim, the largest provider of auction services. Its Manheim Used Vehicle Value Index tracks the prices dealers pay. Trends in auction prices tend to become trends in retail prices after a lag time of six to eight weeks.
Auction prices now sit 1.2% higher than they did a year ago — relatively stable inflation despite higher inflation signals in the rest of the economy.
Prices could still rise, as dealers are low on used cars to sell. They ended July with just 43 days’ worth of vehicles in stock, below the traditional industry target of 60.
Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive, notes, “Used retail supply has further tightened in recent weeks to the tightest level since early April.” That puts upward pressure on prices.
Used car prices tend to follow new car prices with a bit of a delay.
Automakers have mostly held off on significant price increases since April, when the Trump administration enacted new tariffs that could push new car prices higher. But the companies warn that, now that the administration has locked in high tariffs with a series of long-term trade deals, they may not be able to protect new car shoppers from price increases for long.
As new car prices rise, used car prices may follow. But low auction prices are keeping a lid on the increases for now.
