Used Car Prices Could Decline 14% as Inventory Rebounds
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Experts predict that used car prices could decline by as much as 14% as the market recovers from supply disruption issues that sent costs soaring.
A new report from CarGurus states that used and new vehicle prices will likely moderate this year and for the next several years. According to the online vehicle marketplace, there's a lot of room for prices to fall if vehicle inventory returns to normal volumes, as expected.
“There’s hope for additional price declines as prices normalize closer to inflation-adjusted levels,” Kevin Roberts, director of industry insights and analytics at CarGurus, said in a release. “We won’t see a return to pre-COVID pricing, but data indicates there is room for average prices to decline by about 14% for used models and 7% for new.”
For used cars, that would be a drop of about $3,900 from the average list price of $28,600 at the end of March to a new baseline of $24,700. For new vehicles, CarGurus says the average price could fall from the current average of $49,600 to about $46,000.
Why used car prices are falling
Used vehicle prices are falling in part because high auto loan rates are scaring away potential buyers.
In a separate report on Friday, Jonathan Smoke, chief economist at Cox Automotive, said that “demand is tepid at best, as shoppers just don’t have any urgency to buy in the current economic environment.”
The average auto loan interest rate for used vehicle purchases was 11.9% at the end of 2023, up from 10.4% a year earlier, according to Experian.
Also, the used market had been competitive for years because there was such a lack of supply of new vehicles. Now that new vehicle supply has bounced back, more buyers are shopping in that market again. Roberts says the effect is reduced competition for used vehicles.
Still, recent model-year used vehicles are hard to find right now. It's largely a "hangover" effect from pandemic-era semiconductor shortages. Compared to 2020, there’s been a 19% drop in dealers’ inventories of cars less than two years old and a 10% drop in three- to four-year-old cars.
But there’s good news if you’re looking for an older car, as there’s been a 19% increase in the supply of cars aged five years or older.
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