New and Used Car Prices Follow Mixed Trends in January CPI Report
In the latest Consumer Price Index (CPI) report for January, new and used car prices exhibited contrasting trends. While new car prices remained flat and declined slightly year-over-year, used car prices continued their upward trajectory, posting the largest monthly jump since May 2023.
Used Car Prices Surge
Used vehicle prices rose 2.2% in January and have increased 1.0% year-over-year. This marked the most significant monthly increase since May 2023, when prices soared by 3.2%. The recent trend reverses a modest decline in used car prices. However, they remain 14.5% below their peak in February 2022.
The rise in used car prices is attributed to various factors, including supply constraints. Manheim's used vehicle value index, which tracks wholesale auction transactions, increased by 0.4% in January and 0.8% year-over-year.
"While it's not yet spring, wholesale values increased more than we usually see in the month of January, with particular strength at the end of the month," said Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive.
Reduced inventory levels of used vehicles, partly due to fewer off-lease vehicles returning to the market, have contributed to the price increases. Additionally, seasonal factors, such as increased consumer demand for vehicles in the spring, could further push up prices.
Other Transportation Costs
Overall transportation costs have also risen, but at a slower pace. Motor vehicle maintenance and repair rose 0.5% in January and 5.9% year-over-year, while car insurance premiums increased 2.0% for the month and 11.8% for the year.
The surge in auto insurance costs is partly attributable to increased car prices, leading to higher repair and parts expenses. Moreover, the rising cost of labor has contributed to higher repair bills and insurance premiums.