The Party Is Over for Falling Used Car Prices

• While consumers have benefited for the past year from falling used car prices, strong summer sales and fewer cars coming off-lease will put upward pressure on prices 
• With interest rates set to be lowered in September, many new car shoppers will have more flexibility and options in the coming months
• While consumer interest in electric vehicles continues to wane, one bright spot in the market is affordably-priced EVs

Chicago, IL – September 9, 2024 – Over the past year, used car prices – which have fallen by 8% – have been one of the biggest factors pulling down overall inflation. Consumers have taken advantage of falling prices this summer, driving up sales and lowering dealer inventory levels. At the same time, with 2021 marking the start of a drop in leased cars, fewer off-lease cars will be returned to replenish dealer inventory this year. As a result, used car prices (now averaging $32,224) will likely soon be on the rise yet again, according to the latest data and analysis from leading AI car shopping app CoPilot.

In the past year, used cars have seen more significant price declines than new cars (which have fallen by 3% to an average of $49,772). As a result, strong summer sales drove down used car inventory by 17% in the two-month period between early July and early September. Simultaneously, fewer off-lease cars will be returned in 2024 to replenish the dwindling used car supply. While before the pandemic, leasing made up about one-third of new car transactions, that figure fell by one-sixth in 2021 – due to stimulus checks giving more people the ability to buy a car rather than lease, and lower dealer inventories resulting in fewer leasing incentives being offered. In combination, both factors will put upward pressure on used car prices in the coming months and beyond; in fact, prices are already inching upward (up by 2% since June).

“The shortage of off-lease cars from 2021 will have a massive impact on the used car market’s recovery. And with leasing numbers down throughout the pandemic years and beyond, we’ll likely see its impacts reverberate through the used market for years,” said CoPilot CEO and Founder Pat Ryan. “Consumers who need a used car in the short term may want to make a move before prices increase more substantially.”

Some sectors of the used car market where short-term deals may be available include:

• Used SUVs, where the average price ($40,822) is 19% more expensive than it was pre-COVID (compared to 35% for used cars overall)
• Used Chryslers, whose average price ($25,199) is 12% more expensive than it was in March 2020 (compared to 37% for used domestic cars overall)

Lower Interest Rates Will Open Doors

The new car market has been more difficult for consumers to navigate in recent months, due to the one-two punch of elevated prices and high interest rates. However, with the Federal Reserve set to lower interest rates in mid-September, potentially by as much as half a percentage point, the door will start to open for buyers who have been priced out of the new car market for months or even years. 

There are currently a limited number of new cars that can be financed with an affordable monthly payment (defined as $400 or less) – including the Nissan Versa (average price $20,623) and the Kia Soul (average price $23,488). However, they are largely listed between $20,000-$25,000, a range that represents just 3.4% of the new car market. Lower interest rates – when they eventually trickle through the market and lenders begin to issue lower-rate auto loans – may make more cars in the $25,000-$35,000 range a viable option for consumers. (CoPilot has created a VIN look-up tool that shoppers can use to price out specific cars they’re in the market for).

Consumers Actually Like EVs – for the Right Price

Recent headlines – including Ford’s decision to delay plans for a 3-row electric SUV and news that Volkswagen may have to close plants in Germany due to heavy losses on EV investments – continue to illustrate automakers’ challenges in grappling with the fact they overproduced EVs relative to consumer demand. While a prevailing narrative is that consumers are shying away from EVs because they don’t want to deal with logistical issues like charging and infrastructure, in reality, demand for EVs is highly dependent on price. For instance:

• New EVs priced between $30,000-$40,000 (well below the average price for new EVs of $64,415) have a market days supply of 64.

  • This is lower than the current inventory for gas-powered cars of 68 market days supply, and the average inventory for new EVs of 85 market days supply.

• Used EVs priced between $20,000-$30,000 (below the average used EV price of $38,920) have a market days supply of 27.

  • This is significantly lower than the average for gas-powered MDS of 36 market days supply, and the average used EV inventory of 34 market days supply.

For consumers in the market for an EV, there are a number of more affordable options to consider, all of which have below-average supply levels on dealer lots:

• 2024 Hyundai Kona, which has an average price of $38,672 (market days supply of 63)
• 2024 Nissan Leaf, with an average price of $34,557 (market days supply of 67)
• 2024 Kia Niro, with an average price of $38,401 (market days supply of 49)

“Perhaps the biggest single issue around EVs is that automakers misread the technology adoption curve. While EVs were in the early adoption stage, they produced them at volume, as though they were a mainstream product,” Ryan said. “The reality is, right now, EVs are still in the phase where most of its buyer pool are technology enthusiasts who are more likely to have disposable income – rather than the everyday consumer.”

“Though automakers took big losses on their initial EV pushes, the biggest lever they can now pull on EVs is price, and we’re starting to see this become more of a focus in new EV production plans,” he added. “In the short term, the good news for consumers is we’ll likely see more incentives and deals on EVs as dealers look to make a dent in their inventory glut.”

About CoPilot

For journalists and publishers, CoPilot’s data has the best real-time view on prices, sales, and inventory in the new and used car market. By monitoring the online inventory of virtually every dealer in the country, every day, CoPilot:

• Provides fresh, comprehensive, and daily data
• Offers insight on the new and used market, broken down by segment, brand, model, and fuel type
• Looks at current retail prices, which (unlike wholesale prices) are a much more accurate reflection of how much consumers are currently paying for cars

For consumers, CoPilot offers the first-ever AI-assisted car shopping app, which:

• Searches virtually every dealer and analyzes millions of vehicles to find the best car for your needs, at the right price
• Helps you avoid add-ons and hidden fees, and negotiate the best price
• Does not take money from dealers, providing customers with truly unbiased recommendations

Media Contact:

Kerry Close

kclose@groupgordon.com

732-609-2644