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Used-vehicle prices will fall quickly later in 2022, firm says. Here’s why. – Automotive News

Other industry experts anticipate vehicle prices will decline at a more manageable rate.

This month, Cox Automotive chief economist Jonathan Smoke told Automotive News that dealers seem more comfortable that the elevated prices they’re paying to obtain used vehicles won’t come back to haunt them.

Cox expects the Manheim used-vehicle index to peak for a final time between January and April 2022, when customers spending tax refunds would cause a final price spike above the 2021 ceiling seen in November.

Normal depreciation would return after this point, taking used vehicles back down to December 2021 levels in December 2022, Smoke said.

However, December 2021 still represents an elevation over the norm, and Smoke said Cox expects that the wholesale market wouldn’t reach pre-pandemic volume until at least 2025. This would require 17 million new-vehicle sales in 2022, he said.

Silberg called KPMG’s used-vehicle price collapse one of three possible scenarios.

A second forecast offers the “humility” of entertaining that KPMG’s price-drop hypothesis was incorrect, Silberg said. In this future, the “inflationary fire” burns longer, he said. “This thing could drag out,” Silberg said.

Finally, there’s the potential that the Federal Reserve’s response to inflation hits too hard and produces an “ugly story” of stifled consumer demand, he said.

Automakers should develop contingency plans for all three of these potential futures, according to Silberg.

Source: https://www.autonews.com/retail/used-vehicle-prices-will-fall-quickly-later-2022-firm-says-heres-why

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