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Falling used-car price signals trouble for U.S. auto market: report

2019-10-12 02:40

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CHICAGO, Oct. 11 (Xinhua) -- Auto analysts warned that falling used-car prices last month could become a lasting trend, which may come with major negative implications for future new-vehicle demand in the United States, The Detroit News reported on Thursday.

The latest Labor Department report showed a 1.6 percent monthly drop in used-car prices last month, which was its biggest decline in a year. But inflation was also kept in check as the overall core consumer price index increased just 0.1 percent from the prior month, according to the report.

The falling prices were partly explained by the increasing returns of vehicles that have reached the end of consumer leases, according to the report. And the influx of off-lease vehicles would appear as better bargains than new ones on the market for the consumers, said auto analysts.

"If we continue to see used prices decline, it will provide another value option, another buying option for folks who are in the market," the report quoted Cox Automotive's senior economist Charlie Chesbrough as saying.

Meanwhile, Morgan Stanley's auto analyst Adam Jonas cautioned that if the value of consumers' used cars drop, they may have trouble finding ways to finance new vehicles in the coming years, according to the report.

"Continued resiliency in used has been arguably the most important driver of continued affordability," Jonas wrote in a report. "Without such an accommodative lending environment we can only speculate what a natural level of U.S. auto sales would be today. If we had to guess, we'd say sales would be closer to 14 million than 17 million."
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