As 2023 comes to a close, many industries are experiencing highs and lows. The used vehicle market is no exception, experiencing dropping prices both at wholesale auctions and retail dealer lots.
Across the board, all vehicles are experiencing some level of decline in price, including trucks, compact cars, SUVs or commercial vehicles. But is this the right time to make a purchase? The answer might surprise you.
Keep reading to understand:
- Where the used vehicle market currently stands today for potential buyers
- The latest trends in the used vehicle market
This information can provide valuable insight for potential buyers about declining prices and affordable pre-owned car options.
Current Trends in the Used Vehicle Market
Since the pandemic, vehicle prices have skyrocketed. Now, over three years later, we are starting to finally experience a drop in prices. Yet, prices are still historically high. Supply and demand has sent the car market soaring and plummeting throughout the pandemic, even since the earliest days. New car shortages are partially the reason the used car market has been so volatile. The shortage of new vehicles continues to linger but is gradually gaining momentum.
The used vehicle market is continuing to prove difficult due to high interest rates and a volatile job market impacting loan acceptance. Another trend that’s common in today’s economic climate is that used vehicles for sale tend to skew older than in previous years. Near-new vehicles aged three years or newer are more scarce due to lease term cycles and rental agency purchase cycles.
Finally, higher mileage used vehicles cost 40% more in 2023 than in 2019, pre-pandemic. This makes knowing the value of your vehicle that much more important, and understanding the financials surrounding your personal situation when it comes to buying a used vehicle.
The Impact of Economic Changes on Used Car Prices
Experts continue to predict a decline in used car pricing, trending toward prices seen in 2019. This is largely due to supply and demand finally starting to balance out. Used car retail prices peaked in April 2023, and have been on a downward trend since then, as inflation continues to descend.
The reasons behind declining used car prices can be attributed to a number of factors including:
- An overall decrease in new car prices
- An oversupply of used vehicles in the market
- Advancements in car technology, making older models less desirable.
Sometimes, economic fluctuations also force prices down, as people are less able to afford second-hand cars.
The auto market is trending toward a calmer landscape in the near future, as demand greatly outweighed supply. This is what led to the auto-inflation seen over the past few years, with overall inflation contributing to used vehicles. It’s a domino effect; consumers were having to spend more on other essentials such as food, gas and rent (or mortgage), limiting their budget for vehicles. With inflation slowly trending downward (9.1% in 2022 vs. 3% in 2023), consumers are getting back to a place where they can confidently shop for vehicles.
However, low inventory is still an overall concern, considering eight million fewer cars were built during the height of the pandemic lowering the overall supply.
Affordable Pre-Owned Vehicles: What to Look For
Affordable pre-owned vehicles can be found at various sources such as used car dealerships, online car selling platforms, auto auctions, and from private sales. It's always recommended to conduct thorough research and consider factors such as the vehicle's age, mileage, condition, and history report to ensure the purchase is a good deal.
Here are some tips for identifying affordable pre-owned vehicles:
- Determine your budget
- Determine your ideal car/truck/van/SUV
- Search the vehicle’s history
- Test drive potential vehicles
- Understand the vehicle’s reputation
- Have the car inspected
- Understand financing options
Always be sure to perform due diligence to avoid costly mistakes. Ask questions, conduct research, and always get more than one opinion. The more feasible options you have, the more likely you are to get what you want.
The used vehicle market continues to change on a daily basis. It’s important to stay aware of those changes if you’re in the market for a used vehicle, as it will impact your purchase. Understanding what to look for when buying a used car, how economic changes affect the used vehicle market and the latest trends will help you choose a reliable vehicle at the right price.
Stay on top of auto industry reports from analysts and monitor the used vehicle marketplace for the most updated information. And as always, stay informed on economic and global indicators that may impact the auto industry and affect pricing.