Cost and affordability are on just about any checklist for buying a used car. In recent months, a variety of factors have impacted used car value. Supply and demand, inflation, and interest rate hikes are just a few. The pandemic has had impacts as well. According to a study by Cox Automotive, cited by the New York Post, the average monthly payment for a used car rose to $551 per month in November 2022, which is 47% higher than in 2019.1
The trend is expected to continue into 2023. On top of a potential recession looming, many used car dealers have reported declines in sales. Comparisons between Q3 2022 and Q3 2021 reveal the trend in more precise detail:
- A research analyst with Benchmark found a 13% decline in used car sales compared to last year.
- A drop in sales, reported by Carvana, from 117,564 to 102,570.
- A projection by Cox Automotive of a drop in retail used vehicles by nearly 2 million units.1
Will Prices Continue to Rise Uncontrollably?
According to J.D. Power, a consumer research company, between September 2022 and October 2022, used vehicle prices dropped about 2% (it revealed a $600 drop in new car prices as well). Meanwhile, the Manheim Used Vehicle Index found a 10% decline in prices from one year ago. On average, used car prices are hovering in the mid-to-high-$20,000s.2
Whether you should wait to buy a car depends on when you find what you want. Some experts advise waiting. To help you decide, we’ll look at a few trends that have and continue to influence prices.
A Close Look Into the Latest Used Car Market Trends
New cars are in less demand as well. Market analysts have projected sales to end 2022 about 3 million units less than in previous years.1 But why the shifts in prices and demand? A few reasons include:
Supply Chain Issues
The automotive industry has been disrupted by supply chain issues ranging from manufacturing problems to parts and materials shortages, to labor shortages that led to shipping delays, including backups of container ships at ports. Here are some aspects of supply chain trends that have impacted the used car market:
- Disruptions in manufacturing production during the COVID-19 pandemic.
- A shortage of semiconductor chips and other parts and materials.
- As production issues are being alleviated, auto inventories are increasing.
Increasing inventories should lower demand. However, word of the microchip shortage and its impact on how all sorts of vehicle systems work spread across the consumer base. Also, talks of recession are making people weary of buying.
Inflation has driven prices up very quickly in recent months. Increases in interest rates have hit the market as well. The cost of diesel fuel, which is used by vehicles that transport cars, has contributed to pricing and availability issues. There are global factors as well, including the rippling effects of the war in Ukraine.
Older Used Car Prices
Older used cars were once seen as an even bigger bargain. But according to Cars.com, the price of a 3-year-old vehicle jumped 47% from July 2019 to July 2022. For a 5-year-old model, the price jumped 62% over that time, while for a 10-year-old used car, median prices increased 104%!3
Is Buying a Used Car Still Worth It?
Before the pandemic, you could buy a used car at just under half the price of a new vehicle. Currently, the median price of a used model is about 61% of that of a new one.3 Expect to see greater price increases for used sedans than used SUVs and pickup trucks. However, the price of a used car is worth about six months’ salary on average, compared to a new car worth about 10 months of income.2
Visit Hawthorne Auto Square
The news isn’t all bad with the latest used car market trends (and moving forward). Plus, there are signs of improvement when it comes to availability and affordability. Hawthorne Auto Square has hundreds of makes and models on our used car lot. If you’re looking for a high-quality, low-mileage used car with a low down payment, we can help. We also offer used cars with financing (at low-interest rates), regardless of your credit, as well as unbeatable trade-in deals and fast pre-approval.