KPMG warned that used-vehicle prices could fall abruptly and raise negative-equity issues once new-vehicle supply rebounds.
The used-car market has historically been closely correlated with the new-car market, KPMG global head of automotive Gary Silberg told Automotive News on Monday. But used-vehicle prices are up 42 percent over January 2020 levels, while new-vehicle prices have only risen about 12 percent, KPMG said in a white paper released Tuesday.
"Whatever path the new-car market takes to a 'new normal,' used-car prices will eventually return to the traditional relationship with new-vehicle prices," KPMG wrote in the white paper. "In other words, a 20 to 30 percent plunge in used-vehicle prices is in the cards."
The consulting firm also observed that ALG estimates 2021 vehicles' residual value in 2024 wouldn't be significantly higher than usual.
KPMG estimated vehicle supply and demand would achieve equilibrium sometime between October 2022 and 2023, but used-vehicle prices would begin to fall before that point.
"In every scenario, we expect the market to anticipate the turnaround in the new-car supply situation ahead of time and begin repricing used cars before new-car lots are full and used-car demand returns to normal," KPMG wrote.