Used Car Prices Remain High

By Staff Writer May 16, 2023 538

Used vehicle prices have slightly cooled from all-time highs, but a number of headwinds continue to create unfavorable buying conditions in the used market for consumers. According to the Q1 2023 Used Vehicle Report released by the car shopping experts at Edmunds:

  • Used car prices remain historically high. The average used vehicle transaction price in Q1 2023 dipped by 6.4% year over year to $28,381, compared to $30,329 in Q1 2022, but is up 44% from Q1 2018's average used transaction price of $19,657.
  • The $20,000 used vehicle is becoming harder for car shoppers to find. The share of used vehicles sold for under $20,000 was 30.6% in Q1 2023 compared to 60.5% five years prior. In the new vehicle market, the share of vehicles sold for under $20,000 was less than 1% in Q1 2023.
  • The supply of used vehicles is being squeezed across the board, which is contributing to increased demand and elevated prices in the market:
    • Lease volume dropped significantly to 559,000 vehicles in Q1 2023 from 1 million vehicles in Q1 2018.
    • Trade-in volume declined to 5.5 million vehicles in 2022 from 6.2 million vehicles in 2018.
    • Off-rental vehicles, which have historically been a steady source for near-new used vehicles, are now much older and pricier. The average off-rental vehicle age climbed to 3.0 years in March 2023 from 1.9 years in 2019, and the average price climbed to $28,916 in March 2023 from $15,829 in 2019.

 

"The good news is that used prices have softened enough in Q1 to offer some relief for consumers getting pushed out of the new market. The not-so-good news is that the used vehicle market continues to be challenging for car shoppers since there are fewer vehicles available and demand is keeping prices historically high," said Ivan Drury, Edmunds' director of insights. "Consumers returning to the used market for the first time in years might find conditions a bit shocking: Not long ago, $20,000 was seen as an acceptable amount to spend on a used car to get an optimal blend of miles and age. In today's market, $20,000 puts consumers into a much older or much higher-mileage vehicle." 
Edmunds analysts note that used vehicle prices are likely going to stay elevated through the rest of 2023 unless new vehicle sales take a turn.

"If new car sales stall out, automakers and dealers could leverage heavier incentives to entice consumers into new purchases, which would in turn place downward pressure on used car values," Drury said. "But since most automakers have been deliberate in aligning vehicle production and demand to avoid the inventory glut issues they faced prior to the pandemic, consumers probably shouldn't count on any major bargains or discounts through the rest of the year."

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Last modified on Monday, 22 May 2023 13:30