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The impact of inflation on car sales, both old and new

With lower-than-expected sales, Carvana announced this week they would be laying off workers and moving operations away from their Euclid facility.

BROADVIEW HEIGHTS, Ohio — April's numbers from the US Bureau of Labor Statistics showed inflation is up 8.3% year over year, which is down from the 8.5% historic growth we saw in March.

While prices still edged up 0.3% last month, it indicates—for the first time—inflation could be cooling off across some industries, including used car sales.

"You can only sell what you have on the lot or can produce," Louis Vitantonio, president of the Greater Cleveland Automobile Dealers Association, said, "and that's what's causing the issues in our industry."

With used car sales, the Consumer Price Index indicates prices came down 0.4% in April, following a 3.8% decline in March. But on the ground, Vitantonio says the GCADA hasn't seen much change yet, in part because new cars still aren't readily available.

"Used vehicle prices have gone higher and higher and higher, and unfortunately, I don't think we see a turn of that because of the fact that supply on new [cars] is not there and the alternative is used [cars]," he told 3News. "I think every dealer that isn't in our market in Northern Ohio would love to have multiple models, multiple colors, multiple options. It's just not there."

That lack of availability is still driving new car prices up—1.1% last month, according to the CPI. With cars, the pressures that have influenced inflation—global supply chain issues, COVID shutdowns worldwide, war in Ukraine—all remain problematic.

"Any interruption causes a kink in that chain," Vitantonio said, "and so it is a concern."

Online used car retailer Carvana announced this week its letting go about 2,500 workers (roughly 12% of its workforce) and soon moving operations away from its auto reconditioning center in Euclid. 3News reached out for more details regarding the job losses locally, and a spokesperson provided this statement:

"Recent macroeconomic factors have pushed automotive retail into recession. While Carvana is still growing, our growth is slower than what we originally prepared for in 2022, and we made the difficult decision to reduce the size of certain operations teams to better align with the current needs of the business. 

"Saying goodbye to any team member is not a decision we take lightly and we aim to be transparent, thoughtful and supportive throughout this process, including providing meaningful assistance, resources and support to impacted team members. We believe these decisions, while extremely difficult, will result in Carvana restoring a better balance to our operations and facilitate the company returning to efficient growth on its mission to change the way people buy and sell cars."

Carvana's $506 million posted loss in the first quarter of 2022 was attributed to high used car prices and rising interest rates, making for lower profits per sale than expected. If you're in the market for a car, one benefit in all this is your trade-in value will feel a boost.

"[Sellers] are going to benefit from a high market," Vitantonio noted. "Our trade in value is going be high, and that translates into the value you're putting on the vehicle that you're ultimately purchasing. It's not all bad news."

But when buying, be prepared to wait for what you want.

"It's going to take some time," Vitantonio said. "We had thought second quarter, maybe third quarter of 2022, and I think the new vehicle inventories—even being close to pre-pandemic [levels]—is going to be well into 2023."