Record prices for used cars and trucks were the biggest contributor to inflation last month, according to the government’s Consumer Price Index report. Prices for used vehicles surged 7.3% just last month, following an even bigger 10% gain in April. Why are the prices of used vehicles skyrocketing? In short, there are more people buying cars than there are cars in the market. New car trade-ins are usually the biggest source of used cars, but supply chain disruptions, especially a widespread of specialty semiconductors used by auto manufacturers, have limited availability of new vehicles—causing prices of scarce used vehicles to catapult higher. The Manheim Vehicle Value Index, a widely-followed industry yardstick shown in the chart, was described by industry observers as “shocking”. (Chart from Manheim)
Jeffrey Cerny