Are you a prospective car buyer looking for a sweet deal? No? Maybe a savvy seller aiming to maximize your return, then. Whichever the case, understanding the current state of used car prices is essential.

And to answer your question – yes, used car prices are dropping.

Before 2020, the used car market had been on a tear. Prices were skyrocketing due to a combination of factors, including;

  • The COVID-19 pandemic
  • Chip shortages
  • Rising demand. 

However, there is some good news for buyers looking for a deal: used car prices are starting to go down.

According to the Manheim Used Vehicle Value Index, used car prices have fallen by 7.6% since February 2023. This is the largest decline in used car prices since the Great Recession. Why are the prices dropping at such a high rate?

Here’s my 2 cents on the topic.

 

What Influences Used Car Prices?

 

While the car on the market may affect the current price, several factors affect the price. We will only focus on what’s beyond the seller’s control. Some of them include

  • Depreciation: The rate of depreciation can vary based on factors like make, model, mileage, and overall condition. Understanding this depreciation dance is crucial for both buyers and sellers.
  • Demand: Cars that are in high demand will hold their value better than cars that are not as popular. This is because there are more buyers for these cars, which drives up the price.
  • The current market conditions: The overall economy can also have an impact on used car prices. For example, if the economy is strong, more people will be buying cars, which will drive up prices.
  • Supply (The availability of new cars): If there is a shortage of new cars, this can also drive up the prices of used cars. This is because people who want to buy a car may be forced to buy a used car instead, which increases demand for used cars.
  • The time of year: Used car prices can also vary depending on the time of year. For example, used car prices tend to be higher in the spring and summer months when people are more likely to be buying cars.

 

Why Are Used Car Prices Going Down?

Used car prices dropping

J.D. Power’s senior director of insights, Dave Sullivan, also believes that while the used car market is still a seller’s market, things have changed. 

If you’ve read the previous section on what influences those price tags, you probably have some ideas on why the cost of used cars is dropping. But for the avoidance of doubt, here’s why:

First, the supply of used cars is increasing. This is because automakers are finally starting to catch up with demand, and there are more used cars coming onto the market. 

Second, chip shortage is easing: The chip shortage that has been plaguing the auto industry for the past few years is starting to ease. This is leading to an increase in the production of new cars, which is also putting downward pressure on used car prices.

Third, the demand for used cars is decreasing. This is because the economy is slowing down, and people are less likely to buy a new car if they don’t need one.

So, if you were planning on selling your car right now, that’s a bad idea. Unless you really have to, wait a little longer.

 

What Does the Future Look Like For the Used Car Market In the US?

 

CarGurus, an online car marketplace, predicts that used car prices will bottom out in the second half of 2023. The company’s analysts believe that prices will then start to rebound in 2024, as the supply of used cars begins to decline.

Edmunds also believes that the supply of used cars will continue to increase while demand will remain relatively flat. However, we’ll have to wait and see.

One thing is certain: the rate of decline will likely slow down. This is because the supply of used cars is not expected to increase significantly, and the demand for used cars is not expected to decrease significantly.

If you are thinking about buying a used car, now is a good time to do it. You can get a good deal and be confident that prices will not go up in the near future.

But if you want to sell, now is not the best time. Also, the future is uncertain because of the:

  • Rise of electric vehicles: As more and more people switch to electric vehicles, the demand for used gas-powered cars is likely to decline. This could lead to lower prices for used gas-powered cars.
  • Increasing popularity of subscription services: The increasing popularity of subscription services is also likely to have an impact on the used car market. These services allow people to rent cars on a monthly basis, which could make it less appealing for people to buy used cars. This could lead to lower prices for used cars.
  • Continued growth of online sales: More people are buying cars online, which could lead to lower prices for used cars. Online sellers have lower overhead costs, which allows them to pass on savings to buyers.

 

Tips for Buyers and Sellers

car dealer giving client new car keys

As the used car market trends seem uncertain, it’s crucial to have a strategy in place. For buyers navigating this seller’s market, here are a few tips to increase your chances of getting a good ride for the best price:

  • Do your research: Thoroughly research the make, model, and prices of the vehicles you’re interested in to ensure you’re getting a fair deal. Keep in mind how much you’re willing to spend.
  • Expand your options: Consider alternative models or brands that might offer better value for your budget. Also, don’t just go to one dealership. Shop around and compare prices from different dealerships.
  • Be patient: The used car market is still volatile, so it’s important to be patient and not rush into a purchase. That way, you’ll be more likely to find a good deal.
  • Negotiate: Don’t be afraid to negotiate with the dealer. The sticker price is just a starting point, and you may get a better deal if you’re willing to negotiate.

For sellers looking to capitalize on the current market conditions, here’s some advice for you:

  • Stage your car: Make sure your car is clean, well-maintained, and presentable to attract potential buyers.
  • Set a realistic price: While it’s tempting to aim for the stars, setting a reasonable and competitive price will increase your chances of a quick sale. If you set the price too high, you’ll likely have trouble selling the car.
  • Explore different selling platforms: Consider online marketplaces, local dealerships, or even consignment options to maximize your reach.
  • Take good photos: When you’re listing your car online, it’s important to take good photos. This will help potential buyers get a good idea of what the car looks like.
  • Be responsive: When potential buyers contact you, be responsive. This will show them that you’re serious about selling the car.

 

Final Thoughts

 

As the market continues to evolve, you can increase your chances of getting a good deal on a used car.

If you’re a buyer, do your research, be patient, and shop around. And as a seller, set a realistic price, stage your car, and be responsive to potential buyers. 

This will help you navigate the twists and turns of used car prices and get the best offers.