Prices for used cars are still high but expected to drop, dealer says

INDIANAPOLIS (WISH) — Prices for used cars have skyrocketed to historic prices during the COVID-19 pandemic, but the general manager of Falcone Automotive expects them to continue to fall as high interest rates curb demand.

“The prices are still high on a lot of vehicles but they are falling incredibly fast. We’ve noticed that doing recent trade-ins, especially on older vehicles,” Chase Falcone said.

Supply chain issues were the root cause of the used-car price hikes; dealers did not have enough new cars to sell, so whatever used cars were on the lot became hot commodities.

“The used-car prices started going up especially when you have the big used-car places like Carvana or CarMax giving a lot of times over-retail for preowned vehicles, and a lot of people went with it, and prices kept going up as the inventory stayed short,” Falcone said.

Falcone said he normally has over 300 new cars available to sell; now, it is less than 50.

“The manufacturing process is moving slowly. It’s picking up a little bit of speed, but we’re not going to see the level of inventory that we had pre-supply chain crisis for quite a while,” he said.

Falcone said despite the inventory staying relatively low, demand for cars is dropping causing prices to drop.

“A lot of it has to do with the interest rates now,” Falcone said. “We’re seeing interest rates well over 5%, 6%, 7% and continuing to go up, then that’s going to stall a lot of people from purchasing vehicles, especially expensive preowned vehicles.”

Falcone says his dealerships are adjusting quickly to the changing market because he does not want to purchase too many highly priced cars when they might not sell for as much in the future.