New and Used Car Prices: January's CPI Reflects Mixed Trends

January's Consumer Price Index (CPI) revealed contrasting price trajectories for new and used cars.

Used Car Prices Surge

Used car prices continued their upward trend, with a 2.2% jump in January, the largest monthly increase since May 2023. This surge reversed a recent downtrend and pushed prices 14.5% below their February 2022 peak. However, prices remain 23.6% higher than in July 2019.

Factors contributing to this rise include:

* Supply constraints: Manheim's used vehicle value index increased 0.4% in January, indicating a shortage of used inventory.
* Decreased off-lease vehicles: The auto supply chain crisis from 2021-2022 resulted in fewer leased vehicles, leading to reduced off-lease supply.
* Seasonality: Spring is traditionally a strong period for auto sales, boosting demand and prices.

New Car Prices Steady

In contrast, new car prices remained flat in January and decreased 0.3% year-over-year. This reflects a cooling of the once-rapid inflation in new vehicle costs.

Overall Inflation Rises

Overall prices in the US increased 0.5% in January, the largest monthly increase since August 2023. Year-over-year inflation reached 3.0%, slightly higher than December's 2.9%.

Transportation Sector Costs Climb

Motor vehicle maintenance and repair rose 0.5% in January, while car insurance increased 2.0% for the month. The higher cost of cars and parts, along with increased labor expenses, has fueled these increases.