Are Used Car Prices Dropping? Here's What We Know
As the average price of a new car continues to skyrocket, gearheads on a budget have been forced to prioritize. COVID-driven obstacles of supply and manufacture continue to drive up production costs and cut into the availability of vital resources from steel to semiconductors, making new rides more expensive and harder to come by. New car prices aren't quite as brutal as they were in 2022, but they remain high enough to make discerning motorheads think about vintage wheels instead.
Used cars are still expensive compared to pre-pandemic averages thanks to inflation and COVID-driven supply shortages, but a study at ISeeCars found that used car prices had consistently been trending downward in recent months, falling an average of 9 percent from March 2022 to March 2023. As Slashgear has previously reported, while new car prices have been getting fractionally more reasonable since the beginning of 2023, the average new car purchase still comes in at $48,763, far higher than the $31,815 price of the average new car.
Even as the spike in new car prices shows signs of correcting itself, however, a market correction less welcome to car buyers may be coming. Starting in early 2023, Cox Automotive and other sources have found used car prices going up for the first time since the depths of the pandemic. How much of a change should used car buyers expect? How long will it last? Here's what we know.
A high-priced return to normalcy
In part, the rise in used car prices is economic good news. Per another study at Cox Automotive, the sheer number of used car sales has shown a small but steady trend upward. 3.2 million units sold in February 2023, a 3% rise compared to February 2022.
Unfortunately, that recovery largely indicates a cash flow from car buyers' wallets to car companies. More people have more money in their pockets, which means more demand. High new car prices mean that demand gets shunted to used cars. Used cars are by definition a limited market: you can't manufacture a new used car. When any product, from cars to coffee filters, is both desirable and scarce, prices rise.
At the same time, the upward trend in used car prices is likely to prove both moderate and limited. With new car prices dropping, demand for used cars is expected to fall, with prices following. JP Morgan predicts an overall drop of 10% in used car prices over the course of 2023.