Used-car costs are nonetheless sky-high – however they might be easing

Wholesale used-vehicle costs fell in February from January, an indication that whereas costs stay close to document ranges, the surge in U.S. used-car costs could also be easing.

Cox Automotive stated on Monday that its Manheim Used Automobile Worth Index, which tracks costs of used automobiles offered at Manheim’s U.S. wholesale auctions, declined 2.1% in February from January.

Nonetheless, on common, used automobiles are traditionally costly. The index is down from its document excessive in January, nevertheless it’s nonetheless up 36.7% from a yr in the past.

Covid-related supply-chain disruptions – specifically, an ongoing international scarcity of the sorts of semiconductor chips utilized in automobiles, vans and SUVs – have pressured automakers to restrict their manufacturing of latest automobiles. That in flip has triggered a surge in used-vehicle demand, and in used-vehicle costs, over the past yr.

Whereas almost all used automobiles are dearer than they had been a yr in the past, the will increase have not hit all classes of used automobiles equally. Cox’s knowledge exhibits that whereas costs of compact automobiles and vans had been up 44.9% and 48.4% from a yr in the past in February, respectively, costs of used pickups had been up simply 24.8%.

The discrepancy between vans and compact automobiles is a mirrored image of the state of new-vehicle inventories. Automakers together with Ford Motor, Normal Motors, and Chrysler mother or father Stellantis have prioritized manufacturing of their extremely worthwhile (and huge-selling) pickup vans over less-profitable compact fashions amid the chip scarcity.  Which means shoppers hoping to purchase a brand new compact automotive or SUV usually tend to be out of luck, and extra prone to search an analogous mannequin on the used market, than truck-shoppers.

However even pickup-truck manufacturing hasn’t been immune from disruptions. All three of the Detroit automakers have needed to trim manufacturing of vans at occasions over the past yr. And it is not over: Ford final week confirmed that it has as soon as once more been pressured to minimize manufacturing of its Tremendous Responsibility pickups and enormous SUVs due to semiconductor shortages.

Efforts are underway to spice up manufacturing of chips within the U.S. and all over the world. Chipmakers together with Intel and TSMC started constructing new semiconductor crops within the U.S. final yr.

Some automakers aren’t ready. Ford stated in November that it’ll companion with chip provider GlobalFoundries to extend its entry to chips. Normal Motors has begun working with a number of chip makers on new designs that may tremendously scale back the variety of chips utilized in its future automobiles.

Provides of automotive semiconductors ought to start to enhance later within the yr as new factories start working. That in flip ought to ease the new-car scarcity and scale back demand for used automobiles.

However Russia’s invasion of Ukraine could exacerbate the chip scarcity within the close to time period. The nations are important suppliers of neon fuel and palladium, two commodities vital to chip manufacturing.