Used vehicle prices have been falling continuously for the past three months. A recent decline in the prices has shown by 0.4% in April 2022. This fall in prices attracts all buyers of used vehicles in Kenya. The used car industry faced its hardest times after the pandemic was over and the inflationary rates were hitting their peak. As the economy resumed work, the restrained demand for cars rose instantly.
This caused a shortage in the supply of both new and old vehicles. With the shortage of vehicles, cars, and trucks, prices rose too. Only in two months of April and June 2021 did the price rose by 10 percent and accounted for one-third of the total rise in inflation in the country. The last such hyperinflation in vehicle prices was seen back in the 1980s. However, after such a long term of rising prices, the inflation rates are taking ease. According to the government’s published data, vehicle prices fell by 0.2% in February, 3.8% in March, and 0.4% in April. This continuous decline in prices has risen a good opportunity for used car buyers to make bulk purchases and save a lot of any more future inflation is expected.
Analyzed by the Bureau of Labor Statistics, the prices of trucks and used cars have increased by 48% compared to the prices before the pandemic. However, it is much better than in January last year, with an increase of 54%. Therefore, as per the calculations in these 28 months, this time is the best for purchasing vehicles.
Even at the Manheim Auctions, the price index fell 221.2 last month in April, while only in March was it going at 223.5. Since September 2021, this is the cheapest the auctions have sold at. The auction also noted the increasing prices in January 2021 and the recent downward trend increasing the purchases of used cars.
Several factors are helping the industry to sustain lower prices. First, due to the pandemic, people had stopped spending on luxury items like furniture and cars, which also reduced the demand for such goods, indirectly lowering the inflation on the prices of these durable items. As the pandemic has finally passed and the demand has risen for these goods, production is increasing too. Hence, the new cars are being bought and sold again, flourishing the used car industry with more supply for the increasing demands.
However, as the prices fall, the interest rates increase. The Federal Reserve has doubled the interest rates, making it difficult to borrow loans due to the hefty interest to pay. As the borrowing cost increases, the existing auto loans will stay the same as most auto loans are fixed; however, any future borrowing will be done at the new and higher rates. Thus, again compromising the budget of the buyer.
Used vehicles have not been given complete relaxation presently; however, it is working towards that direction. Moreover, the recent fall in prices has given quite a relief to the existing buyers.