Over 60% of American households and 82% of individuals can’t afford a new car. Car prices crash by 60% but the worst is yet to come

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In a surprising twist, car prices are experiencing a dramatic shift. After years of seemingly endless climbs, prices are now plummeting at an alarming rate. Here are some key points:

  • New Vehicle Prices:
    • Industry analysts report that the average price of a new vehicle has dropped by nearly 20% year-over-year.
    • This decline is a welcome relief for consumers who have long grappled with high prices.
  • Used Car Market Volatility:
    • The used car market is even more volatile, with prices plunging by an astonishing 59% from the 2022 peak.
    • Seasonally adjusted prices of used vehicles sold at auctions across the U.S. fell to $18,151, the lowest since April 2021.
    • Luxury cars, SUVs, pickups, midsize cars, EVs, and compact cars all saw significant price declines last month.
  • Historic Plunge:
    • Auction prices had spiked by a mind-boggling 64% from February 2020 to the peak in January 2022.
    • However, the recent plunge has surrendered 59% of that spike, resulting in a $5,423 drop in prices.
  • Consumer Impact:
    • More than 60% of American households currently cannot afford to buy a new car based on Census data.
    • For individuals, the situation is even worse, with 82% unable to afford a new car.
  • Root Causes:
    • The fundamental shift in car pricing began with increases in new car prices during the pandemic.
    • Factors include supply issues, increased production costs, and higher profit margins.
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According to data shared by Wolf Richter, seasonally adjusted, prices of used vehicles that were sold at auctions across the U.S fell to $18,151, the lowest since April 2021, and are down by $5,423 (or 23%) from the peak in January 2022, according to the Used Vehicle Value Index by Manheim, the largest auto auction house in the U.S. “From February 2020 through the crazy peak in January 2022, auction prices had spiked by a mindboggling 64%, or by $9,252,” Richter noted. “The historic plunge so far has surrendered 59%, or $5,423, of that $9,252 spike.”

Last month alone, prices fell significantly in all major vehicle categories on a yearly basis, according to Manheim. Luxury cars went down by 12.9%, while SUVs & crossovers prices declined by 14.6%, pickups lost 15.2%, midsize cars fell 16.8%, EVs dropped by 17.5%, and compact cars went down by 17.6%.

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