Used car prices jump most since May 2023 and could push higher as inventory shrinks

New and used car prices were mixed to start the year in January’s Consumer Price Index (CPI) reading, but used prices continued trending higher, with January’s jump the largest since May 2023.

New car prices were flat in January and down 0.3% compared to a year ago, whereas used vehicles popped 2.2% in January and were up 1.0% for the year.

This comes as overall prices in the US rose 0.5% over the previous month , the largest monthly headline increase since August 2023 and a slight acceleration from the 0.4% rise seen in December. Year-over-year prices rose 3.0% over the prior year in January, an uptick from December's 2.9% annual gain in prices.

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Used vehicle prices had been rising month over month since September’s report, and this month’s 2.2% gain was the largest monthly jump since May 2023, when prices jumped 3.2%.

This recent trend reversed a slight downdraft in used car prices. Compared to their peak in February 2022, prices paid for used vehicles are now down 14.5%.

But during the pandemic, used vehicles were on a tear. 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 23.6% higher than in July 2019.

One of the reasons why used vehicle prices are climbing higher in a generally slow time for the market could be supply.

Manheim’s used vehicle value index , which tracks used vehicle transactions at the wholesale auction level, rose 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. “Currently, retail days’ supply at used dealerships sits nine days lower than last year, and we are just now on the cusp of starting the spring wholesale market.”

Robb added that the Manheim index is at its highest point since October 2023, after the industry experienced stronger-than-usual gains on a non-seasonally adjusted basis.

Which is all to say the industry is seeing price gains when not expected. Lower used inventory is a cause, and this tends to correlate with a decreased amount of off-lease vehicles coming back to the market.

The auto industry suffered from a supply chain crisis in 2021 through 2022 , meaning fewer vehicles were sold and leased. Vehicles leased then will be coming off lease now, as 36-month, 42-month and 48-month leases are completed.