A Changing Market: How Dealers Can Navigate the Declining Value of New and Used Vehicles

The new and used vehicle market has dramatically changed within the last five years, causing headaches for both buyers and sellers. In this ever-changing market, the Consumer Price Index (CPI) of new and used vehicles has seen quarterly increases until recently. In Q2 2022, both new and used markets saw a dip in their CPIs and have decreased ever since. With this change, your dealership could see a boost in sales with consumers wanting to buy vehicles at lower prices. In this post, you’ll uncover how the shifts in the Consumer Price Index can directly influence your sales potential and alleviate inventory problems.

Understanding the Consumer Price Index

The Consumer Price Index is calculated by the U.S. Bureau of Labor Statistics and measures the average change in price over time. Consumers can find CPIs for a variety of consumer goods such as food, rent, and, in this case, new and used vehicles. Using a base period (e.g., 1982‒1984), a CPI can be greater, less than, or equal to 100.

Used and New Vehicle CPI

Since 2020, the CPI on vehicles has skyrocketed, reaching 179 for new vehicles and 215 for used vehicles. This changed in Q2 2022, when CPIs in both markets started a significant downward trend. The steady new car market has seen a 3% drop in prices from the peak in 2022. The used car market has been impacted the most, with prices almost 14% lower than the high. As of July 2024, CPIs have fallen to 177 for a new car and 174 for a used car.

What This Change Means for Dealers

As a dealer, the downward trend in CPIs could potentially increase your sales, with consumers wanting to buy new and used vehicles at lower prices. This drive in sales might alleviate high “days of inventory” problems dealers face before new models hit their lots.

To prepare for a potential increase in buyers, here are a few tips to help your dealership get ready:

1. Conduct Inventory Analysis — Know what vehicles are on your lot and where they are.
2. Streamline Your Trade-in Process — Use programs like NMVTIS to verify vehicle title information before you accept a trade-in.
3. Develop an Online Presence — Create a user-friendly website accessible to buyers.

With CPIs declining and prices dropping, dealers can capitalize on this downward trend as buyers look for deals on new and used vehicles. By being proactive, you can turn these market shifts into sales opportunities.