3 Charts That Show Why Car Prices Are Still Near Record Highs

iStock

Strong sales numbers in the new car market are finally slowing down consumer demand for used cars. As vehicle manufacturers responded to new and used car inventory shortage by accelerating production in the first half of 2023, many consumers who had been holding off capitalized on the opportunity to finally buy a new car. This surging demand for new cars consequently cooled demand in the used car market, as inventory rose, sales slowed, and prices fell for the first time this year.

“The new car market is coming back as supply finally starts to replenish, and consequently, consumers are becoming less interested in buying used cars,” said CoPilot CEO and Founder Pat Ryan. “Even while the impacts of the current economic slowdown remain concentrated among the most affluent consumers, causing what’s been termed a ‘richcession,’ this group is still buoyed by strong consumer confidence and pent-up savings from the pandemic. As a result, they’re still buying new cars at near-record high prices – and we expect this strong demand to persist at least through the summer buying season.”

“In the long term, however, the outlook for the car market depends on vehicle manufacturers’ next move: if they’ll continue to produce more vehicles to keep demand down and finally start to stabilize prices,” Ryan added. “The next several months will be very telling in terms of what the new normal will look like for car shoppers.”

Using its PricePulse data set, CoPilot measures the difference between what any used car price would have been today, if not for the extraordinary dynamics of the past two years, versus how much it is actually worth now, at retail. 

CoPilot

Used Car Prices Fall for First Time This Year, Still Hovering Near Peak

As of July 1, 2023, CoPilot’s Return to Normal Index found that used car prices are hovering near peak pricing levels – but falling for the first time in five months – after seeing significant price increases in the earlier part of 2023. Used cars were listed at an average price of $31,969 in June, falling by just $66 since May. On average, used cars have a Price Premium of $8,037 (or 34%) above projected normal levels. 

This is a result of new car supply finally rebounding, as dealers responded to ongoing inventory shortages by producing more vehicles in Q2. This jump in supply sent consumers who had been waiting to buy a car to the new car market, rather than to the used car market, particularly the 1-3 year old cars that consumers have relied upon as a substitute for new vehicles throughout the pandemic. As a result, demand has finally started to cool in the used car market, particularly among the most expensive vehicles that drove the increases in the used car market in early 2023.

CoPilot

Nearly New Cars Lead Used Car Market Price Declines

Overall price declines were led by nearly-new (1-3 year old) cars, which fell in price by $500 in June, after jumping by 5% in the first half of the year. The Premium for nearly-new vehicles also dropped by 5%, as consumers, who traditionally turned to these cars as substitutes for new cars during the pandemic, instead bought new vehicles as supply finally replenished. While nearly-new sales increased by 5% month-over-month, inventory was able to keep pace, increasing by 7%, paving the way for dealers to continue to lower prices for vehicles in this age bracket.

In June, preowned (4-7 year old cars) had an average listing price of $28,500, a $242 decrease from May, and down $498 from April. The Price Premium for pre-owned cars was $7,417 (or 35%) above projected normal levels, a $92 decrease since April. Older (8-13 year old) used cars had an average listing price of $17,313, an $85 decrease from May. In the first half of 2023, older used car prices have slowly and steadily declined, peaking for the year in February at $17,727, and falling by a total of $354 in the subsequent five months.

CoPilot

SUVs Lead Price Surge, Up A Staggering 9% In Three Months

In June 2023, used SUVs were listed at an average price of $43,525, down by just $26 since May, but dropping in price for the first time in 2023. Before reversing course and falling this month, used SUVs showed substantial price increases between January and May, up $3,400 (or 8%) in that five-month period. As these vehicles hover near peak prices, sales finally slowed this month – potentially indicating consumers are reaching their limit for paying near-record high prices for some of the most expensive vehicles on the market.

Bucking this trend of used car price declines, however, are used minivans, which have increased in price by 7% since February. Now with an average listing price of $25,092, used minivans are currently priced $7,464 (or 42%) above projected normal levels.

“Despite used car prices starting to fall, it remains a very tough time to buy, especially for consumers in the market for more affordable vehicles, or for popular segments like minivans,” said CoPilot CEO and Founder Pat Ryan. “While we may see more relief on pricing in the second half of 2023, with supply yet to fully recover and interest rates still high, it will likely be a long time before used cars become significantly more affordable to consumers in real terms.”

This story was produced by CoPilot and reviewed and distributed by Stacker Media.