4 Charts That Show Car Prices Are Falling, But Still a Long Way From Normal Levels
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While the COVID-era inflation in the used car market finally started to ease in late 2022, this dip abruptly reversed course in the first half of 2023, as new car inventory continued to struggle with supply shortages and consumer spending remained surprisingly resilient. Between January and May 2023, used car prices jumped by 5%, before falling again in the summer as new car supply rebounded at last and consumers became increasingly bogged down by multiple interest rate hikes driving up the cost of cars in real terms. Since May, however, they have dropped only by about 2% (or $500). Therefore, while the market is starting to correct from the run-up in prices seen in the spring, there is significantly more room for prices to continue to fall.
“With used car prices finally easing this summer, many consumers may be asking themselves, ‘Should I buy the dip?’ The short answer is ‘No!’” said Pat Ryan, CoPilot CEO and Founder. “This is the start of a course correction for the used car market. So far, prices have only fallen to the levels they saw at the start of the year – but have yet to make up the very substantial gains they saw across the past three years of the pandemic, and they have a long way to go before approaching normal levels again. Consumers in the market for a used car therefore should wait: In the next few quarters, there will almost certainly be better bargains to be had.”
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 Are Dropping, But Still Near Peak Levels
As of August 3, 2023, CoPilot’s Return to Normal Index found that used car prices are down, but still hovering near peak pricing levels. Overall, used cars had an average price of $31,529 in July 2023, down $320 (or 1%) since June, as replenishing new car inventory continues to soften prices in the used market. This month marks the second consecutive month of price declines, with used car prices down nearly $500 overall since peaking in June.
Used cars have a Price Premium of $7,497 (or 31%) above normal levels, representing a $425 (or 5%) decline from the previous month. Their Premium has steadily declined since April, down by over $600 (or 7%) in the past three months, suggesting prices are likely to fall further.
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CoPilot
Used Cars Are Still Priced More Than 30% Above Normal
1-3 year old (nearly-new) car prices had increased by $1,700 (or 4%) between January to April. Since peaking in the spring however, they’ve fallen by $1,693 (or 4%) – almost back to the levels at which they started the year. Demand for vehicles in this age bracket remains strong, with nearly-new vehicles seeing a 7% spike in sales volume during July – partly a function of the traditionally busy summer buying season.
Between January and April 2023, pre-owned car prices had shown slight increases (up $181), before reversing course and dropping in price for the past four months. In that time, they have decreased by nearly $1,000 (or 3%). Older used cars have fallen steadily in price since April, down by a total of $443 (or 3%) in the past four months. Despite these drops there’s still high price premiums, over 30%, across all age segments.
CoPilot
Bigger = Cheaper, SUVs & Trucks Closest to Normal Price Levels
In July 2023, used SUVs were listed at an average price of $42,958, down by $457 since June, dropping in price for the second month in a row. Year-over-year, used SUV prices have fallen by just $696 (or 2%). Consumers took advantage of used SUV prices starting to correct, with sales up 3% in July. While they are starting their journey back to normal pricing, they still have much further to fall.
After SUVs, pickup trucks remain the used segment second-closest to returning to normal levels, on a percentage basis. After increasing steadily in price, up by $1,774 (or 5%) between February and May 2023, this marks the second consecutive month in which used pickup prices declined. Similar to recent price declines seen in used SUVs, used trucks have yet to fall enough in price to offset the gains they saw in the spring, indicating that there is further for prices to fall.
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CoPilot
Electric Vehicles Are The Best Value In The Market
Though consumers are better off waiting to buy across the vast majority of segments in the used car market, used electric vehicles are the rare exception, remaining one of the strongest buys in the used car market in 2023. In the past month, used EV prices have fallen by another $1,200 (or 3%) to an average of $42,891, a massive $24,500 or 36% below their gas-price driven peak in July 2022.
Dominating this segment are used Teslas – still feeling the ripple effects of price cuts to new models since December 2022 – fell by another $1,800 (or 4%) in July alone, to an average of $43,624 (39% below last summer’s peak of $71,100). Consumers have been taking advantage of these price declines, snagging deals on cars like a used Tesla Model X. Used Tesla sales volume saw an 8% spike in July and used EV sales overall jumping by 11%.
