According to auto service organization Cox Automotive, the continued hike in borrowing rates and the influx of new cars in the market were responsible for the drop in second-hand vehicle prices.
"New inventory is finally starting to build, and that's producing momentum in new retail sales," said Cox Chief Economist Jonathan Smoke. "But that momentum appears to be at the expense of used retail – especially it's the traditionally used car buyer that's most impacted by payment affordability."
ZeroHedge's Tyler Durden predicted that used car prices will start to decrease because they are almost the same as those for new cars. He cited the used car market bubble claiming its first victim – online used car retailer Carvana, whose stock tanked by almost 43 percent after its creditors formed a pact amid bankruptcy risks. (Related: Used car prices DROP 10.6% year-over-year in October – the worst decline in nearly 14 years.)
Bloomberg reported that people familiar with the matter said Carvana's 10 biggest lenders made a three-month pact to act together in case it gets restructured. These lenders, which include PIMCO and Apollo Global Management, hold around $4 billion of the company's unsecured debt.
"Carvana is not involved in any cooperative agreement amongst bondholders and we will not be addressing any questions that arise from actions taken by such bondholders," a company spokesperson said.
"Our message to our customers, shareholders, employees and other stakeholders remains clear: we are singularly focused on executing the plan profitability outlined in our Q3 Shareholder Letter and we have substantial liquidity to get us there. In no way does today's news change that strategy."
Study: Buyers still can't afford used cars despite massive price drops
In spite of used car prices recording a year-over-year decline since January 2019, consumer income only rising a measly 13 percent from that period until now means even used cars are still out of reach for the average buyer.
According to one recent study by automotive search engine iSeeCars, used car affordability between August 2019 and August 2022 plunged to 26.7 percent. It looked at 33 models that were originally affordable between April and December 2019, and found that these models were no longer affordable for potential buyers from January to August this year.
The Toyota Avalon led the top five list of three-year-old models whose prices increased, now selling for $13,181 more than it did in 2019. It was followed by the Chevrolet Traverse, Volvo S60, Ford Mustang and Acura TLX.
"This is yet another indicator of how drastically prices have shifted on used cars in recent years, said iSeeCars Executive Analyst Karl Brauer. "When you have a used Toyota RAV4’s price going from $20,534 to $32,090 in three years, there’s a clear indicator of affordability lost."
He added that car shoppers would still need to replace their vehicles. But with used cars becoming less affordable – shoppers are either taking longer loan terms and paying higher interest rates, putting down less money for a down payment or even forgoing the kind of car they originally wanted for a lower-cost model in order to make ends meet.
Check out Bubble.news for more stories about the used car market bubble.
Watch this video that discusses the precarious future of cars and car sales in the United States.
This video is from the Zoon Politikon channel on Brighteon.com.
More related stories:
High car loan rates are driving away prospective buyers.
Used truck prices drop as trucking industry overcomes supply chain issues.
Used car prices are finally starting to drop, but many consumers still can't afford payments.
RBC analysts: US car sales falling to recessionary levels.
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