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Used car prices have soared. When might they start to come back down?

Used vehicles are fetching record prices, and record-high monthly payments.

DALLAS — For the fourth-straight month, the wholesale cost of used vehicles went up. According to the Manheim Used Vehicle Value Index, the average wholesale price has risen by 21.4% since last August -- and by 46.6% from December 2020 to December 2021.

Used car dealers paying more, passing those costs along to consumers

Those higher wholesale prices paid by dealers often translate to higher retail prices charged to consumers. So, if you have bought a used vehicle recently, it wasn’t your imagination -- costs have exploded. Moreover, one analysis in the middle of last year found Texans were paying the sixth-highest price in the country for used autos.

Nationwide, the average secondhand car hit a record high of $27,569 at the end of November, according to Kelley Blue Book. And Edmunds reports that the average payment for a used car is a whopping $520 per month -- for 70 months. 

Again, that is for a used car. And since dealers were paying more in the wholesale market in recent months, we could see even more sticker shock when those vehicles hit retail lots.

Which vehicles are going up the most in price?

Data shows that vans passed all other auto types in price increases (up 61.8% from December 2020 to December 2021). Pickups picked up the least (up 36% in the same time frame). That may be good to know if you are shopping in the months ahead.

When might used car prices start to come down again?

Used car prices may not go down much until new vehicle manufacturing picks up tremendously. That has been slowed by several factors during the pandemic, but especially by a worldwide shortage of computer chips. Those microprocessors are vital in today’s new models, providing the brains for our increasingly complex vehicles. 

In this report, Goldman Sachs features a chart showing how smart our cars have become over the years, explaining that a typical 2021 model has 298 computer chips inside it. Until enough new chips can be made, new car manufacturing will remain hobbled. Sachs predicts low inventory of new cars will persist through the middle of 2022.

So, use caution; take care of your ride because consumers in search of a used automobile may be in for a continuing steep grade ahead in used car pricing.

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