Used car prices have become more accessible in recent years because many dealerships now offer fixed prices that don't require negotiation. This transparent pricing upfront not only makes the car buying process more enjoyable for customers, but it also allows us to accurately measure trends in the retail market.
2020
When the COVID-19 pandemic began in early 2020, used car prices initially followed their usual seasonal patterns by increasing slightly, but by April, they began to drop. Prices reached a low point in late spring. By the late summer, the microchip shortage began impacting prices. Prior to the pandemic vehicle sales hovered around roughly 17 million units a year. In 2020, approximately 14.5 million new vehicles were sold (After Market News). This meant more demand for used vehicles to fill the empty spots on dealer lots. This led to skyrocketing prices resulting in some used vehicles with average mileage being worth as much as a new car.
2021
At the start of 2021, demand for used cars rebounded while retail prices lagged slightly behind wholesale prices. In March 2021, there was a significant increase in used car prices driven by factors such as stimulus payments, tax season, and shortages of new vehicles. Retail prices continued to rise, but at a slower pace during the following months. The year came to a close with an accelerated rise again, with prices steadily increasing week after week. By the end of 2021, the retail listing price index had risen by 36% compared to the beginning of the year.
2022
In most of 2022, the index remained relatively stable (Black Book Data). However, towards the end of 2022, there were declines in the Retail Listings Price Index, although they were not as sharp as the declines in wholesale prices.
2023
(Black Book provided this analysis based on a dataset of approximately two million vehicles listed for sale on dealer lots in the United States. The index is calculated while keeping the average age of the vehicle mix constant to accurately identify market movements.)
It’s been an interesting year so far. The first few months followed a similar trend to the last few years, but we have seen a bit of an unexpected rise in prices since March. Prices have continued to consistently increase ever so slightly for 2-6 year old vehicles with average mileage.
What’s Next?
It is anticipated that there will be a decline in the prices of used cars in the near future. In order to estimate the selling prices, we observe the prices at which vehicles are bought and sold among dealers. Changes in the wholesale market are typically reflected in the retail market about six to eight weeks later. Dealers have been purchasing used cars at auctions for lower prices for roughly six weeks now. Consequently, we anticipate that a decrease in prices will occur very soon.