Used Car Market Not Likely to Crash Despite Wild Ascent
Jan. 14, 2021—Despite a dizzy rise in used car prices in 2021, Cox Automotive's chief economist isn't worried about the vehicle market crashing this year.
Both the used and new car markets saw unprecedented growth in 2021; new car prices jumped around 13 percent and used car prices more than doubled that, spiking around 27 percent in 12 months according to a report from Kelley Blue Book. That has led some to suggest that the economy is sitting on a used car bubble, which could cause a crash in prices and would leave "millions of Americans upside down on loans they took out to buy used cars last year."
However, Cox Automotive Chief Economist Jonathan Smoke says the core idea of crash revolves around the idea that the relationship between new and used car prices is "severely out of whack," when actually the gap between the two is right around what it has been for the last decade.
“We are forecasting wholesale used-vehicle values to lose about 3 percent year-over-year by the end of 2022,” Smoke said in the report. “No one, dealers nor consumers, needs to worry about a crash in used-vehicle values.”