If you have been following used car prices, you may have noticed that they have increased quickly in the past few months. After the drop in price in 2022, you may wonder why things have changed and what it means for the next few months. After all, this unexpected spike in price can have a significant impact whether you’re shopping for a used vehicle, or you want to sell your car. So to help, we've put together this handy guide to what is happening to used car prices at the start of 2023.
Why Did Use Car Prices Decline in 2022?
Prices for used vehicles went down in 2022, with prices for used cars in October down 15 percent over what they were in January of 2022. Rising prices on other goods, which lead to inflation, are partially responsible for the drop in price. With prices going up for gasoline, car insurance, and maintenance, fewer people could afford to buy a vehicle.
Another reason for the drop in used car prices is based on supply and demand. During the pandemic, there was a shortage of new vehicles. Since there were fewer options and delays in getting a brand-new model, more buyers turned to newer used vehicles, driving the price up. Now that new vehicles are slowly being released, demand for used vehicles has gone down.
Why Has There Been a Recent Spike in Used Car Prices?
This year is seeing a return to the higher prices for used models. The recent spike comes from fear of inflation and the rising cost of car loans. Interest rates have gone up on new vehicles, making them less affordable for the average buyer. What's surprising is that experts in the industry didn't expect the spike because they predicted consistently falling prices. Tax refunds are also playing a part in the spike with more refunds being processed in 2023 than at the same point in 2022.
For the week ending 2/21/23, the used car market prices went up 14%. Of the used vehicles listed for sale, the biggest jump was in models two years old and newer, which went up 41%. Sporty cars and full-size models had the highest increase. Trucks saw an increase in price during the same week with seven of the 13 segments on an upward trend.
Anyone who needs to upgrade from their current vehicle will normally consider a used vehicle to be more affordable than a brand-new model. With payments climbing to more than $1000 per month for a new model for many buyers, vehicles that are just a year or two old are becoming more attractive. This increase in demand is helping to cause a spike in price.
During the pandemic, fewer people were getting into new leases due to shutdowns and fears of job losses. Today, those vehicles would normally be hitting the used-car market, and they are markedly absent. With more people getting back to work and tax refunds coming in, the demand for used vehicles is continuing to rise while inventory remains low.
What's Going to Happen to Use Car Prices in the Coming Months?
You can expect much of the same for the next month or two until inventory and demand level out. At that point, the prices will start to decline. Automakers aren’t offering cash back on new vehicles and interest rates are still high. Because a brand-new model is less affordable, buyers will continue looking at models that are one to three years old.
Experts predict that this increase in prices will taper off by late April or early May. Most tax refunds will have been processed with another increase in interest rates by the Fed likely. Put these factors together, and you can expect prices to taper off on used vehicles.
Since affordability is a key factor in the used car market, owners will likely be keeping their current vehicles longer. Instead of trading in a vehicle after a year or two to get the latest technology, they may continue to drive their vehicles for a few more years, which reduces supply in the used car market.
What Does the Increase in User Car Prices Mean for People Looking to Buy a Car?
If you plan to buy a used vehicle in the next few months, you can get ahead if you start saving money now. Begin looking around before you need it because it may take longer to find what you want. You may also need to be willing to give up some of your dream features to get into a newer used car.
Be prepared to pay more regardless of what kind of vehicle you choose. Know what it’s going to cost you, including interest, insurance, and gas to make certain of what you can afford. Shop around to find a model in your price range, which could be outside your local area.
What Does the Increase in User Car Prices Mean for People Who Want to Sell a Car?
For anyone who is looking to sell a vehicle, you’re in the perfect situation. You can command a higher price for your vehicle and have buyers competing. You’ll get more out of your vehicle than what you would have received a few years ago. If your car is just a year or two old and in excellent condition, you’ll get top dollar. Don't expect these higher prices to last long, so take advantage of the market in the next month or two.
Whether you choose to sell your vehicle privately or to a dealer, you can expect to get some serious cash. You’ll get multiple offers, which gives you the opportunity to negotiate the highest price.
To get the best offer possible, you’ll want to make sure the vehicle looks its best. Keep it clean and have it serviced. If you can prove that the vehicle has been well cared for, buyers will be willing to pay more.
Sell with Carwiser
Selling a vehicle in today’s market can be challenging as you try to find the best offer. Carwiser makes it easier because we do the hard work for you. Fill out our quick form and we will scan our network of dealers to find the best offers local to you.
You’ll be in the driver’s seat the whole time. You get to choose which offer you want to take or reject them all if you feel your vehicle is worth more.
Sell your car fast with Carwiser. Get offers now for your car or give us a call at 619.343.3729 for more information.