Used Car Prices Are Finally Falling

After years of high prices even on used car lots, American drivers have almost gotten used to paying premium prices. Now, those prices are falling.

How Much Can Buyers Expect to Save?

For years, severe shortages plagued the automotive industry. Manufacturers had to cut production, which increased demand and caused prices for new cars to soar. As more drivers turned to used car lots instead, those vehicles also experienced price increases.

Now, all that has changed. Will 2024 be the year that car prices finally stabilize or even begin to fall?

What Caused the Price Inflation?

Let’s start with a brief recap of how new cars got so expensive. The problem started during the COVID pandemic when a worldwide shortage of computer chips forced manufacturing plants to curb production.

Since supply and demand drive the automotive market, prices soared. For most of 2021, many new car lots were nearly empty. Buyers had no leverage in negotiations, and prices soared.

As new cars became increasingly unaffordable, many drivers turned to used car lots. Again, as demand rose, so did prices. Many buyers were elbowed out of the market entirely.

What Has Changed?

Many years have passed since the COVID pandemic created the supply chain disruptions that began this problem. However, it takes time to resolve any shortage.

The problem was compounded last fall as the United Auto Workers union went on strike. Now, everyone is back to work. Car manufacturers have the parts and labor they need to resume business as usual.

American car dealerships had just 1.74 million new cars for sale at the end of January 2023. That number rose to 2.61 million at the same point in 2024. That increase in supply gives new car buyers a wider range of choices and more leverage in negotiations.

As more American drivers upgrade to new models, used car lots have been filling back up, and prices for pre-owned vehicles have also begun to fall.

Average Prices Are Falling

According to Edmunds.com, the average price for a new vehicle fell 1.2% year-over-year in January. Now, the average cost of buying new is $47,338. That’s down 2.4% from the peak pricing set in December 2022.

While this seems like a modest drop compared to the rise in prices resulting from pandemic-era shortages, analysts predict the trend will continue. As manufacturers continue to produce new cars, availability expands, and automakers lower their prices to compete.

As the prices of new vehicles fall, the same is happening on used car lots. If anything, the difference is more significant. The average price of a used car was $27,297 in January 2024. That’s down 3% year-over-year and 12% from the peak set in April 2022.

The best news is that analysts predict these trends to continue. Experts believe that used car prices will continue to fall until the spring when peak buying season could create a rise in demand. In other words, now is the time to buy a new or pre-owned vehicle.

 

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