Used Car Prices Are Improving, at Least for Some Cars

Shoppers looking for a great deal at a used car are in for a pleasant surprise. After months of rising used car prices, there seems to be little hope that car prices may come down. The average used car price fell in August, which could mark a return to normal for the car industry.

How Did We Get Here?

The COVID-19 Pandemic shook the world across multiple industries. The auto market took a huge hit as supply-lines and parts delays made it nearly impossible to find a brand new car. As people moved away from the city and avoided public transportation, the demand for cars soared.

Since new cars weren’t easy to find, shoppers went after used cars. As everyone learns in their Intro to Economics class, great demand and low supply mean higher prices. Used cars have become so competitive that many pre-owned vehicles are more expensive than their brand-new counterparts.

When you stopped by a used car dealership in Utica, NY, for example, it was hard to know what you would find, if anything, on the lot.

A Return to Normal

While the auto market may never return to what it once was, there are some signs that balance is coming. One of the first signs market watchers are seeing is the price of used cars at auctions.

Many used car dealerships buy their vehicles at various auctions. In the first two weeks of September, the price of these used cars has fallen 2.3%, which is after a 4% drop in August. Typically, if a dealership pays less for a car, they can sell it for a little less.

Sedans Gaining Attention

While it appeared that sedans were on their way out of the spotlight, make American drivers are returning to these more fuel-efficient vehicles to save money amidst rising fuel costs. Smaller sedans are especially seeing a renewed interest.

The challenge is that many manufacturers have already started to cut production of their sedans, which means there aren’t many new options out there. With a renewed interest in this body type and a short supply, sedans aren’t seeing the drop in price that you might find with other vehicles.

Pickup trucks and SUVs were gaining popularity pre-COVID, which means they had higher production numbers. Since these body types were the main focus of production once supply lines caught up, there are more options available today than a few months ago. That means you’re likely to see prices drop on used SUVs and trucks first.

Healing the Supply

Most dealers measure their supply in a metric they call “days of inventory.” This metric represents how many days their current collection would last if no new cars could be obtained. In September, every used car dealership averaged 48 days of inventory, which is similar to the inventory at the same time in 2019.

It still may take more time before everything reaches balance, but all signs point to normalcy being on the horizon.