SEATTLE — Two years ago, anyone could sell a used car.
The pandemic and a global semiconductor shortage in 2021 slowed production of new vehicles. With low supply and high demand, used-car prices spiked nationally, nearly 43% on average, between February 2020 and September 2022, according to a J.P. Morgan report.
At Daily Deals Auto Sales, a small used-car dealership near Green Lake along Aurora Avenue North, owner George Riad said the market was so hot that cars sold themselves.
“We would purchase a vehicle, literally just wash it, not even detail it, post it online and boom. It’s sold within two days,” he said.
Those days have come to a screeching halt. Last month, Riad said, he sold only nine cars, his worst month in five years.
Amid fears of a recession and rising interest rates, the used-car market is starting to tighten. Two Seattle-area dealerships said they’ve seen sales lag in recent months, and CarMax and Carvana, both used-car businesses, have reported losses.
According to the report, used-car prices have peaked and are expected to decline by 10% to 20% nationally this year. New car prices will largely hold steady and should only decline by 2.5-3%.
Consumer appetite for electric vehicles, meanwhile, is growing, in part because of policy efforts like incentives included in the Inflation Reduction Act. U.S. electric vehicles sales jumped by two-thirds last year, as the broader auto market contracted, according to The Wall Street Journal.
This winter was also slow for Jim Jahn, owner of Auto Connections Seattle, a small independent dealership in Interbay that sells European and other imported cars.
While the market for inexpensive cars under $12,000 stays relatively stable, demand for more expensive cars is more sensitive, since people often take out loans to buy them, he said.
The average interest rate on used-car loans has increased from 10% around a year ago to 12.3%, according to market research firm Cox Automotive.
Jahn said he expects to see an “adjustment” early this year, but is optimistic things will improve. His 16 years in the used-car business taught him to weather all kinds of waves, he said.
“It’s sink or swim. You just got to do the best you can do to survive out there,” he said.
Sales were a roller coaster last year, Riad said. During the summer months the dealership, which employs two people including Riad, only sold up to 20 cars a month. Then, in September, they had their best month: 38 cars sold.
Riad believes uncertainty around inflation and the cut to pandemic-era benefits have made people less willing to buy cars, and more willing to repair them. Still, he hopes sales this month will be better than last month.
“I strongly believe the car business will remain strong because people will always need cars for transportation,” he said.
According to car website Edmunds, while inventory is improving, supply is below normal. Those looking to buy may need to be flexible around brands and colors and prepared to act quickly.
Though sales have slowed, the average price of a new vehicle is higher than the manufacturer’s suggested price. In 2022, the average price was around $600 to $700 higher, but it fell to around $300 above the suggested price in December, according to Edmunds.
Trade-in values are also expected to fall. That, combined with high prices, means buyers may have to put more money down to get a reasonable monthly payment. The end of 2022 saw a record high average down payment of $6,780 for new vehicles and $3,921 for used, according to Edmunds.
“While I don’t expect pre-COVID type of discounts this year, we’re definitely seeing movement in favor of the customer,” said Ivan Drury, Edmunds’ senior manager of insights.
Material from The New York Times and The Associated Press is included in this report.
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