Car prices kept sliding in August — among the most of any major category in the Consumer Price Index (CPI) over the last year — as vehicle prices move toward pre-pandemic levels.
Used car prices fell 1.0% over the prior month in August and 10.4% from the prior year, data from the BLS revealed on Wednesday. New car prices were unchanged in July, but down 1.2% from the prior year.
Compared to their peak in February 2022, prices paid for used vehicles are now down 20.2%. Used car prices rose more than 40% annually in both June and July 2021, and again in January and February 2022. Prices for used cars and trucks are still 16.1% higher than in July 2019.
Read more: Cell phones, furniture, used cars: Here’s where prices are easing up as inflation cooldown continues
In August, headline CPI rose 0.2% over the previous month and 2.5% over the prior year, which was a slight deceleration compared to July’s 2.9% annual gain in prices and in line with economist expectations.
The continued downward pressure in the used and new vehicle market comes as inventories build up, leading to lower prices — especially when it comes to used cars.
But recent data shows downward pressure on new car prices, too, which now top $45,000 on average.
Cox Automotive’s Kelly Blue Book (KBB) reports that for the 11th straight month, the average transaction price (ATP) for a new vehicle in the US was lower year over year, as higher inventories continue to push prices lower. KBB said that August’s ATP of $47,870 was lower by 0.6% compared to the revised July ATP of $48,166.
KBB also found that the average incentive package for new cars in August equaled 7.2% of ATP, up from 7.0% in July. August’s percentage was the highest KBB had seen since the first half of 2021.
“In our latest dealer survey, the message about price pressure was very clear,” Cox Automotive executive analyst Erin Keating said in a statement. “Dealers are telling us the sales environment is humming along at a muted pace, and there is growing pressure to lower prices, just as the overall cost index hit a new record high.”
Even more help for car buyers coming?
Although it is moderating, inflation has remained above the Federal Reserve’s 2% target on an annual basis, as noted by Yahoo Finance’s Alexandra Canal regarding today’s CPI report.
However, recent economic data, including a jobs report that indicated a weakening labor market, points to an all-but-certain rate cut by the end of the Fed’s next policy meeting on Sept. 18.
A rate cut of the benchmark Fed Funds rate would mean lower interest rates for consumers, meaning cheaper loan payments on cars and more attractive overall prices for cars — both new and used.
The high-rate effect is very real for car buyers. Vehicle research and data firm Edmunds found that 3 out of 4 used car shoppers are targeting an interest rate between 0% and 5%, but 6 out of 10 car buyers who financed a used vehicle in July 2024 agreed to an interest rate between 6% and 11%.
A Fed rate cut would be welcome news for car buyers this fall, and Fed Chair Jay Powell sounds like he is amenable to it.
“The time has come for policy to adjust,” Powell said at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyo., last month, indicating lower interest rates are on the way.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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