Between the COVID-19 pandemic and associated supply chain disruptions, the used car market has had a wild few years. Used car prices skyrocketed through late 2020 and early 2021, rising 45% in the summer of that year, then began to fall, eventually experiencing the most substantial one-year decline since 2009. good thing for car buyers.
Citing Edmunds.com Inc., which maintains vehicle information and inventory size, CNN illustrates the ups and downs:
Data from Edmunds shows the average price of a used car purchase in December at $29,533, down nearly $1,600 from the all-time high of $31,095 set in April 2022. The average price of a used car today is about the same as the average price of a new car in 2010.
While the prices of used cars of the latest model are only 5% lower than their peak [according] according to Edmunds, the price of older used cars, those five years old or more, have fallen 15% or more from their peaks in early 2022.
According to experts, the fall in used car prices is partly due to the rising cost of financing a car, thanks to rising interest rates. In addition, CNN points to a warning from used car dealer CarMax, which says higher interest rates and higher prices hurt the market because they reduce consumer demand.
The main problem, however, is that fewer new cars are available and the reduced supply of new cars from the factory has caused prices for used cars to rise. Greg Markus, an executive vice president of AutoLenders, told CNN that “at one point, it seemed like everyone who was going to buy new ended up buying used.”
As supply chain issues begin to resolve and automakers find it easier to source materials they need, such as computer chips, new car sales are increasing, reducing demand for used cars. According to Greg Markus, falling used car prices had nowhere to go but fall.
The rise in used vehicle prices has been a critical factor in the country’s overall inflation rate, contributing about one percent to rising consumer prices between April 2021 and May 2022. discount on the total rate in December.
This is good for those looking to buy a used car, although it may have a negative effect for some consumers by reducing the overall value of the car they want to trade in. According to Edmunds, the average trade-in value fell nearly $3,000 in December from its peak in June 2022.
Reductions in trade-in value are likely to keep car prices low overall, as it will reduce what consumers are willing to pay for a new ride in 2023.
