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In the latest inflation reading, used cars are one of the few categories that are priced lower than they were a year ago.
While the consumer price index—which measures changes in the prices of various consumer goods and services— increased by 7.1% in November compared to the previous year, prices for used cars and trucks showed an annual decrease of 3.3%. It compares to some categories that continued to climb well above prices a year ago, such as eggs (49.1%) and plane tickets (36%). New car prices are 7.2% higher.
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Despite falling used vehicle prices, they are still 33% higher than normal depreciation, said Pat Ryan, founder and CEO of CoPilot, a car shopping app.
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“It’s important to remember that prices are still grossly inflated relative to all normal market conditions,” Ryan said.
“In the new year, we can expect more substantial and accelerated price declines across the board, as vehicle inventory continues to replenish,said Ryan, adding that dealerships are also reacting to growing consumer resistance to paying record prices for cars.
Demand in the used car market has soared during the pandemic as supply chain issues have hampered automakers’ ability to produce new vehicles. However, the situation is slowly improving with modest inventory improvements on dealer lots, as rising interest rates putting pressure on affordability.
Price drops vary by car type and age
As used car prices decline from their highs, the declines depend at least in part on their age and the type of vehicle.
Used electric vehicles saw the biggest drop: the average price of $54,314 in early December is down 20% from July’s record low of $75,324, according to CoPilot data.
For used hybrids, the average price of $43,574 is a 12% drop from July’s high of $49,809. For both segments, whose demand increased earlier in the year as gasoline prices rose, an easing in gasoline prices also coincided with a drop in demand for electric and hybrid vehicles.
Among body types, SUVs and minivans saw the biggest decline this year. List prices for used SUVs are averaging $41,468, down 7% from a high of $44,824 in March. Used minivans cost an average of $24,992, down 8% from $27,257 in March.
By age, cars 1-3 years old have an average price of $38,987, down 8% from July’s high of $42,375.
Among 4-7 year olds, the average price is $27,137, down 13% from January’s high of $31,265. And in the 8-13 age bracket, the average price of $16,601 is also down 13% from April’s peak of $19,215.
With prices expected to continue falling next year, some buyers may not want to wait.
“If you can pay cash now and avoid skyrocketing interest rates [on loans], this month is the best time to buy in over a year,” Ryan said. “With prices finally down year-over-year…and dealers eager to meet year-end sale, this could be a good time to negotiate. “
For most buyers, however, “our advice is to wait for the used car market to finally return closer to normal levels in 2023,” Ryan said.