A decline in used-car prices can trouble the U.S. auto market

The new car market is facing a global downfall as the sales numbers of many automakers are decreasing month-on-month. The US scenario in regard also depicts the downward trend. As reported earlier, the decline in the prices of used-cars has contributed a major portion of subdued inflation in the U.S. economy last month.

According to market analysts, this declining trend may impact the new-cars demand for long. The last month's drop of 1.6% in used-cars prices can be observed as the biggest decline so far, as per the report of the Labor Department. On the contrary, the overall core consumer price index received a very small gain of 0.1% from the previous month, which is far less than expected.

The situation is further explained by Charlie Chesbrough, a Cox Automotive’s senior economist, “The decline in used-car prices is explained in part by rising returns of vehicles that have reached the end of consumer leases”.

However, the auto-analysts have already warned the economy that a huge supply of off-lease vehicles would be flooded to shake the carmakers. The used-cars offer better price-deal to the buyers compared to the new ones.

During a tour at Michigan auto-auction facility run by Manheim, Chesbrough quoted, “It’s only going to get more competitive for the new side. If we continue to see used prices decline, it will provide another value option, another buying option for folks who are in the market.”

An auto analyst of Morgan Stanley, Adam Jonas, mentioned in a report that the continued resiliency in used has been arguably the most important driver of continued affordability. And without an accommodative lending environment, the levels of US auto-sales can be speculated to 14 million only.

Stay tuned to Zigwheels US for more such insights.

Also read: Top 5 compact SUVs of 2019