The used car market is experiencing a pricing surge that has buyers looking toward much older vehicles as affordability becomes a central concern. Despite a small softening in prices, used cars remain significantly costlier than pre-pandemic levels, challenging both daily drivers and hobbyists.

A study by iSeeCars highlights the stark reality faced by consumers: a budget of $23,000, which could secure a three-year-old vehicle in 2019, now barely covers the cost of a six-year-old car. The supply of newer used vehicles has sharply declined, with one-year-old used vehicles supply down almost 46% since 2019. Two- and three-year-old cars have seen supply decreases of 19.5% and 26.7%, respectively.

Karl Brauer of iSeeCars attributes this inflation partly to the reduced production numbers during the pandemic. Prices for late-model used cars have surged, with one-year-old models averaging $46,403 in 2023, a significant jump from the $28,000 average in 2019. Older models also saw price increases, though some have experienced decreases.

The impact is far-reaching, with consumers even shopping for project cars facing an uphill battle. The once-affordable beaters on online marketplaces now come with a hefty premium.

Amid the soaring values, Black Book reported that cars are now retaining about 10% more of their value after three years compared to during the pandemic. Shane Sutherland of Northport Motors notes that they are “constantly selling vehicles with 80-100,000 miles that are providing excellent value for customers.”

S&P Global Mobility’s data underscores this trend, with the average age of a passenger vehicle on U.S. roads hitting a record 12.5 years.

Experts suggest that inflation has played a significant role in maintaining, and in some cases, increasing the values of used cars. Paul Oster, CEO of Better Qualified, points out that “Your used car is worth that much more at trade-in or to sell it on the open market.” For those considering their options, industry professionals advise looking into certified pre-owned vehicles or buying out leases if the current value exceeds the residual value.

Cactus Auto’s blog post on the best age for a used car to purchase puts forth depreciation as a crucial factor. A new car loses a significant portion of its value immediately after purchase, which tapers off over time. The sweet spot for buying a used car appears to be models that are 2-3 years old, avoiding hefty depreciation while still securing a vehicle in good condition. However, considerations such as maintenance costs and features should not be overlooked.

While prices for used vehicles have begun to ease, they remain high, with the average used car cost hovering around $27,000, paired with an average interest rate on used car loans at 11.7%.

Alain Nana-Sinkam from Triple Double Automotive advises on the gradual improvement in new-car availability, suggesting buyers might find better deals with new cars. He also mentions that with more buyers gravitating towards new cars due to improved deals, used-car prices for older models have begun to relax somewhat.

Pat Ryan, CEO of CoPilot, notes that used EV prices have seen a decrease, with used Teslas in particular selling for substantially less. For those needing to purchase a vehicle now, experts suggest prearranging financing, considering older models known for reliability, and being prepared to act swiftly in a market that hasn’t entirely settled.

The persistent elevation in used car pricing can be traced back to the global microchip shortage and other supply chain disruptions since the onset of the pandemic.

Sam Abuelsamid, an analyst with Guidehouse Insights, brings attention to the ongoing supply chain challenges, including other components like airbags.

Despite the slight reduction in wholesale prices, retail buyers are yet to see significant savings. Nana-Sinkam clarifies that current retail prices reflect the higher wholesale costs dealers paid earlier.

With budget cars still in demand, Pat Ryan asserts that while used car prices have eased, they have not yet returned to “normal” levels and remain unaffordable for many.

Relevant articles:
– Rising used car prices push buyers into much older vehicles, Autoblog, Sep 21, 2023
– Car values increasing along with demand for used vehicles & average years on the road, CBS News
– What’s the Best Age of a Used Car to Purchase?, cactusauto.com
– Car Prices Remain High, Making Buying a Challenge, Consumer Reports