Used car prices went higher in August. In this video post I’ll explain why car prices might not be dropping just yet.
On a relative basis the Manheim Used Vehicle Value Index has increased 15% since March. In practical terms that means a car dealer that paid $10,000 for a car at auction would be paying $11,500 in today’s world if all else is considered equal.
Car buyers so far this year have been able to secure roughly as much financing as they have in the past 5 years. We can see this in the latest Household Debt & Credit Report published by the Federal Reserve for Q2. At the same time, distressed borrowers who might be expected to transition to serious auto loan delinquency have yet to materialize. Have COVID stimulus packages been propping up these borrowers? Will their behaviors change without government assistance?
Through June of this year credit card debt is the first 5 major liability metrics to increase. The percent of balances 90+ days delinquent is flirting with levels not seen since the start of the 2009 financial crisis.
New car sales are down 22% year over year since July. This is equivalent to ~2 million less new cars sold. With ~99.7% of auto production stopped in April 2020, U.S. buyers were able to but ~600,000 car dent in the U.S. car inventory. But there may still be 2 to 3 million cars in the inventory of car dealers around the country. Auto production around the world however has flipped the switch, returning to production levels in the ballpark of where they’ve been the past 7 years.
