Following the onset of the COVID-19 pandemic and resulting production issues and supply chain shortages, new vehicle inventory shrunk to new record lows, which prompted many to look to the used vehicle market. That, as one might imagine, this shift caused the same sort of issues with used vehicles as well, and we’ve seen prices soar to new record heights over the past few years as well. However, early this year, used car prices began to cool slightly, and that trend has largely continued throughout 2023, even as demand remains relatively high. Now, according to new data from Edmunds, it seems as if used car prices may in fact be finally returning to normal levels.
In its Q3 Used Vehicle Report, Edmunds notes that prices for those types of vehicles have declined by 5.5 percent year-over-year, a trend that’s at least partially driven by the fact that new vehicle inventory has improved – driving down prices to below MSRP, on average, for the first time in years. The company also identified a number of factors that it says could signal that the used vehicle market is in fact experiencing a course correction.
For starters, the more substantial gap between used and new vehicle pricing has returned – the average three-year-old and newer used vehicle was priced at $13,686 below the new-car industry average price in Q3 2023 versus $8,950 in Q1 2022, while EVs have declined by 29.5 percent compared to the rest of the market at 4.8 percent. Used vehicles have begun to depreciate once again as well, but there are some caveats, as Edmunds notes that newer, cheaper used vehicles remain a bit hard to find.
“Q3 showed signs of a return to normalcy in the used car market, albeit at still-elevated prices,” said Ivan Drury, Edmunds’ director of insights. “Both dealers and consumers should benefit from the lessening of market turbulence as pricing and transacting can be handled with less risk that a vehicle’s value will move sharply in either direction over a short period – as was happening throughout the past few years. Anyone attempting to compare today’s used car market to the ‘Before Times’ will likely wince at current values, but stability is nonetheless an encouraging sign. In the short term, consumers who have been on the fence should approach a used car purchase with more confidence knowing the auto industry has moved past its most significant production pipeline challenges to catch supply up to, and even surpass, demand.”
We’ll have more on the state of the used vehicle market soon, so be sure and subscribe to Ford Authority for 24/7 Ford news coverage.
Comments
We haven’t had “normal” used car prices since Cash for Clunkers.
Baloney.
Yeah, and the sad thing about the whole ordeal was about 1.5 million vehicles that were not klunkers got crushed for nothing. Alot of these cars and trucks were collected cars that I would kill to have now. Another prime example of good money after bad.
possible reason for this is the demand may be slowing down for all vehicles, not just the the beat down EV sector. The car lots are full off off lease vehicles that they loaded up on by dealers not wanting to see a repeat of the post pandemic buying surge and the perception of the empty car lots that caused a buying surge. Prices appear to be a but lower but that is offset by higher interest rates. Unless you have cash, you’re right where you were. The plus side for consumers is the dealers can’t sit on the inventory without adjusting the price down after a period of time. They need the cash flow.
A lot of dealers are still into vehicles for a LOT more money than they can recoup, there’s quite a few vehicles I’ve been looking at that the dealers have had for MONTHS and they’re like 10k plus underwater on. They’re hoping some fool comes by and rescues them, but just getting deeper and deeper.in the whole on them.
The other factor is that dealers are just moving cost around. They’re playing with “protection plans” they’ve applied that they don’t disclose until you get final numbers. All the sudden there’s a $2k fee for “advantage protection program” that’s like, nitrogen in the tires, some sort of claimed coating on surfaces, etc… it’s pure junk fees that they use to pad their profits, and put buyers on the defensive in negotiations, because now you’re negotiating from a number they have artificially inflated.