Unless your car or truck is at its breaking point, don’t buy a used one now.
If you do, know that you’ll be paying 37% more that you would have last year, according to new data published in the December Consumer Price Index.
In August, prices for used vehicles were starting to come down a bit (1.5%) after months of record gains, but that didn’t last long. In December alone, used car and truck prices rose by 3.5% after increasing by 2.5% a month in October and November.
Meanwhile, prices for new vehicles rose by 1% last month — and are up nearly 12% compared to December 2020.
Does that sound strange? It should.
Traditionally, a car depreciates in value the second it leaves a dealership lot and it only continues to depreciate the longer it’s driven.
But car manufacturers can’t produce as many cars as they’d like because of the ongoing global microchip shortage. That’s putting upward demand pressure on used cars.
Get Breaking Stock Alerts
So when will used cars start to become cheaper? No one knows for certain. But what experts do know is that once the microchip shortage dissipates, prices for used cars should as well.
And omicron isn’t helping — in fact it’s likely to further disrupt the supply chain for cars as well as other goods.
“As the year progresses and booster shots are administered globally, supply chains should begin to function more normally again,” Katherine Judge, senior economist at CIBC, said in a note published Wednesday.
That “will result in downwards pressure on vehicle prices, and that will be a key driver of the expected deceleration in inflation during the second half of the year,” she added.
Overall, Americans are paying 7% more for goods and services across the board compared to a year ago. That’s the highest inflation Americans have seen in nearly 40 years.
President Joe Biden said in a statement published after the CPI was released that “this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets.”