- Used car prices fell 5.5% over the 12 months ending in the third quarter, as the pandemic's aftershocks on the auto market have faded.
- The supply chain disruptions that made prices skyrocket in 2021 have diminished, although prices remain far above pre-pandemic levels.
- Even as prices have gone down, car buyers' budgets are still strained by high interest rates on auto loans.
Good news if you’re in the market for a used car: Prices have dropped from absurdly expensive to merely extremely expensive over the past year.
Used cars sold for 5.5% less on average over the 12 months ending in the third quarter, with the average transaction price falling to $28,935 from $30,603, auto market data company Edmunds said in a report Monday. While still 44% above the $20,085 recorded in Q3 2018, it was a welcome sign for shoppers that the frenzied pandemic-era used car market is returning to something approaching normal.
“Both dealers and consumers should benefit from the lessening of market turbulence as pricing and transacting can be handled with less risk that a vehicle’s value will move sharply in either direction over a short period—as was happening throughout the past few years,” said Ivan Drury, Edmunds’ director of insights, in a statement.
Used car prices surged in 2021 after the pandemic disrupted the production of new vehicles, leading to shortages. Bizarrely, some car owners found that their vehicles had actually increased in value since they bought them and that some used cars were selling for more than their new equivalents.
As the pandemic’s effects on the economy have faded, the used car market has gone back to something resembling normal, though still more expensive than before.
For example, the gap between prices for new and used vehicles, which narrowed during the pandemic, has widened again. The average price for used vehicles up to three years old was $13,686 below the new ones in the third quarter, up from $8,950 in 2022, Edmunds said.
While shoppers have gotten some relief on prices, the same can’t be said of financing: Interest rates on car loans have surged to their highest levels since 2007 in recent months because of the Federal Reserve’s campaign of anti-inflation interest rate hikes. A typical loan to buy a used car charged 11.6% in October, up from 11.1% in July, according to Edmunds.