Surging Demand Drives Used Car Prices Up For First Time In Seven Months, Delaying the Market’s Return to Normal
Price increases are led by 1-3 year old cars, which are once again priced more than $10,000 above projected normal levels
Early March confirms a price rebound across segments, brands, and fuel types, based on strong sales, falling inventory, and high wholesale prices paid by dealers
Expect prices to rise during March and into April due to tax refunds and consumer confidence that is defying Fed attempts to quell inflation; then depreciation to resume later in the year
Chicago, IL – March 6, 2023 – After more than half a year of steady price declines, used car sales volume jumped by 5% in February, driving down supply and causing dealers to start to raise prices for the first time in seven months. Now priced at $30,628 on average, used cars overall are $7,157 (or 31%) above projected normal levels, according to new data from leading car shopping app CoPilot.
New car sales volume increased almost 10% from January to February, even as the average new car price has increased to over $50,000 for the first time ever. Many consumers, priced out of this new car market, turn to nearly-new (1-3 year old) vehicles as a substitute, with these cars seeing an 8% jump in sales volume. As a result, the average 1-3 year old car increased in price $359 or almost 1% to $40,325 - before dealer fees and interest, which are also on the rise. This listing price is $10,194 (or 34%) above projected normal levels, reversing the recent trend towards more normal used car prices.
“The used car market is making a major reversal,” said Pat Ryan, CEO and Founder of CoPilot. “Prices fell during the second half of 2022, so in early 2023, consumers who had been waiting to buy, capitalized on the market reaching its most affordable levels in well over a year, and sales surged in January and February. Now inventory is dwindling and we’re starting to see dealers raise prices again, particularly on newer used models that are in highest demand. We’re also hearing from consumers that their negotiating power at the dealership is down and that they’re facing more in hidden fees. Compounded by rising interest rates, these factors are significantly driving up the real cost of a used vehicle.”
While used SUVs and used pickup trucks remain the two segments closest to returning to normal levels, both saw price increases in February for the first time in months:
- Used SUV prices increased for the first time in six months, jumping by $433 to an average of $40,446. Their Price Premium increased for the first time in a year, surging 11% from January, with used SUV prices now $6,508 (or 19%) above projected normal levels.
- Similarly, used pickup trucks increased in price by $228 since January, and are now listed at an average price of $39,943. Their Price Premium increased by 5% in February, to an average of $8,578 (or 27%) above normal.
Led by aggressive price cuts to new Tesla models in January, used electric vehicles (and Teslas in particular) have seen substantial price declines so far in 2023, down by 6% and 8%, respectively. However, as the market adjusted to this new pricing, used EV price declines slowed to 2%, ending February at an average listing price of $47,644. Used Tesla price declines also slowed to 2%, and dipped below $50,000 for the first time in two years, to $49,160.
This weekend’s news from Tesla, slashing $5,000 and $10,000 off the price of new Model S and Model X cars, will flow through to used Tesla prices, but CoPilot expects this to take a few weeks.
In the meantime, CoPilot data for late February and early March show used car sales accelerating (up 6-7% per week) and prices rebounding for used for most brands, segments, and fuel types, as expected based on widening Price Premiums. The company predicts this surge to continue through March and into April before prices begin to fall again later in the year.
“With inventory near historic lows, it’s shaping up to be another challenging few months for retail car buyers,” Ryan added. “We’re predicting a couple more months of rising prices – fueled by strong employment, consumer confidence, and tax refund season – before used car prices resume their gradual trend back toward normal later in the year.”
CoPilot’s Return to Normal Index tracks how far current used car prices are from where we would expect them to be in a normal, non-COVID economy. Consumers can also use CoPilot’s Price Pulse tool to check the current market value and Price Premium for any car.
CoPilot is a leading, data-driven car buying app that provides consumers with an expert partner for high-consideration purchases, starting with car buying and ownership. The platform combines powerful data backed by human expertise to introduce transparency to the shopping, purchasing and ownership journey. The mobile application takes the time, frustration, and guesswork out of the process, empowering people to easily navigate the risks of shopping for high-value items, and to buy with confidence at the right price and the right time.
CoPilot provides free pricing tools for consumers. Price Pulse makes it easy for car shoppers to check the current market value and Price Premium for any car, track price changes, and compare years and models to choose the right car and know when to buy. For car owners and sellers, Price Pulse calculates the real-time value of their car, using the same data only dealers used to have, allowing consumers to track how much their vehicle has appreciated, so they can decide whether and when to sell, or negotiate the best deal at trade-in or lease-end.
For media publishers, CoPilot offers free, embeddable data tools, including Price Pulse market trends, allowing journalists and bloggers to integrate interactive charts and tables within their web content, apps, or newsletters, powered by CoPilot’s unique data and analytics.