The change comes despite new car prices rising during the month. The price of the average new car is now approaching the record it set last December.
“The end of May showed some interesting and divergent trends for new and used listing prices,” said Charlie Chesbrough, senior economist at Cox Automotive. “We expected vehicle inflation to decline as the anniversary of the start of the chip shortage passes, and that, indeed, is happening in the used market.”
Chesbrough predicts further declines in used car prices over the summer.
Cox Automotive is the parent company of Kelley Blue Book.
US auto dealers had fewer used cars for sale than normal last year. Inventory levels have started to recover. Dealerships opened June with around 7% more vehicles for sale than a year ago.
The supply traditionally drops in the spring when the IRS begins issuing tax refunds, allowing many Americans to buy cars.
However, the IRS is behind its usual pace in issuing refunds.
Through May 20, the IRS had issued 74% of scheduled refunds for the year, while in 2019, 100% had been issued two weeks earlier. However, the average refund is up 11% from 2019 and 7% from a year ago, the highest refund on record at this point in tax refund season. Much of this spending could instead take place in the second quarter.
Dealerships are also struggling to find affordable used cars for their lots.
What affects the new car market today affects the used car market years later. After the 2008 recession, automakers built fewer cars for several years. That leaves few older, higher mileage cars for sale today.
Auto dealers measure their supply of cars by a metric they call “days of inventory” — the time it would take them to sell at the current selling rate if they couldn’t acquire more. Dealers started June with just 25 days of cars under $10,000. They had a nearly 49-day supply for those priced over $25,000.