24/7 Wall St. Insights

• The prices of used cars dropped sharply in July.
• It has become a good time for Americans to buy a used car.
• Also: 2 Dividend Legends to Hold Forever.

For those worried about inflation, the consumer price index for July was good news. After three years with an increase of over 3% and several over 7%, the index went up only 2.9% during the month. The Federal Reserve will likely drop the federal funds rate, improving interest rates for everything from home to car loans. One component dropped very sharply. The prices of used cars and trucks were down 10.9%.

Used vehicle prices surged for many months as supply chain problems tightened the supply of new cars. Because new cars were scarce, dealers took advantage of this and pushed used car prices up as well. That changed as part of a classic supply/demand cycle as new car manufacturing returned to normal and new car lots filled up.

Another reason the cost of a used car dropped was that dealers began to offer incentives to clear out what was suddenly an abundance of new car supply. This lowered the prices of some new cars, making used cars less attractive.

Another reason prices for used cars dropped is that people are holding on to their older cars longer—the average price of a vehicle on the road is 12.6 years. Drivers save money, the theory goes, because cars are better built and last longer.

No matter the reason, it has become a good time to buy a used car.

The Fastest-Selling Used Cars in 2024

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