In part, the rise in used car prices is economic good news. Per another study at Cox Automotive, the sheer number of used car sales has shown a small but steady trend upward. 3.2 million units sold in February 2023, a 3% rise compared to February 2022.
Unfortunately, that recovery largely indicates a cash flow from car buyers’ wallets to car companies. More people have more money in their pockets, which means more demand. High new car prices mean that demand gets shunted to used cars. Used cars are by definition a limited market: you can’t manufacture a new used car. When any product, from cars to coffee filters, is both desirable and scarce, prices rise.
At the same time, the upward trend in used car prices is likely to prove both moderate and limited. With new car prices dropping, demand for used cars is expected to fall, with prices following. JP Morgan predicts an overall drop of 10% in used car prices over the course of 2023.
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