No Signs of Slowing Down: The Used Car Market Is Not Returning to Normal Any Time Soon
Strong consumer demand for newer, more expensive vehicles keeps used car prices near record highs
Consumers in the market for more affordable models face more limited options amid inventory shortages of older vehicles
Electric vehicles represent a rare bright spot for used car buyers, with Tesla leading the pack and down $22,000 in less than a year
Chicago, IL – June 5, 2023 – Sales volume and prices in the used car market have surged since the start of the year, and show no signs of a slowdown, according to new data from leading car shopping app CoPilot. Driven by the higher end of the market, newer vehicles and more expensive makes and models like SUVs, used car sales and prices will likely remain strong through the traditionally busy summer buying season.
Amid strong consumer demand and confidence, particularly among more affluent consumers who continue to benefit from pent-up pandemic-era savings, used car prices have increased by $1,693 (or nearly 6%) since February. In May, they were listed at an average price of $32,113, marking the fourth consecutive month of price increases, though they increased at a slower rate than in April.
More expensive vehicle segments, particularly SUVs, lead the market’s continued surge. Used SUVs – now on average $43,652 – have increased in price by $3,502 (or 9%) in the past three months alone. They are priced $9,076 (or 26%) above normal levels, a 53% increase in their Premium in that same time period. Within the SUV segment, the most expensive models are seeing the most substantial price increases, with full-size luxury vehicles increasing by 9% (or $5,281) and full-size SUVs up by 11% (or $4,496) in that same time frame.
While prices of 1-3 year old vehicles dropped by a mere $225 in the past month to an average of $41,057, their sales jumped 9% in May, fueled by a strong Memorial Day weekend. With their average price hovering above $40,000 for the fourth consecutive month, these nearly-new vehicles are a strong indicator of robust consumer confidence and resilient demand, which will keep inventory low and prices elevated for the foreseeable future.
In fact, 1-3 year old cars are now priced $10,678 (or 35%) above normal levels, and this Price Premium has increased by almost $900 since January. These prices at the more expensive end of the market are propping up the overall used car market, where the average Premium is back up to $8,191 (or 34%) above normal levels – a striking rebound up from its low point of $7,056 (or 30%) at the start of the year.
“CoPilot’s Price Premium Index tracks the gap between current used car prices and what they would be in a normal market,” said CoPilot CEO and Founder Pat Ryan. “The signal it is sending is that prices are back up again in recent months, and show no signs of dropping any time soon.”
“As soon as prices dip even a little bit, or dealers offer any kind of discount, buyers are swooping in,” he added. “Buoyed by still-strong consumer confidence and pent-up pandemic-era savings, more affluent buyers are showing no hesitation to pay near-record-high prices for the priciest vehicles on the market. This strong demand at the upper end of the market is making used cars more expensive overall, especially compared to where we would expect them to be in a non-COVID economy. As a result, it’s unlikely we’ll see the used car market return to normal any time soon.”
Meanwhile, at the older, less expensive end of the market, tightening credit standards and higher interest rates are making vehicle purchases even less affordable in real terms. This part of the market is experiencing an inventory shortage, with dealers’ supply of 4-7 year old and 8-13 year old cars reaching near-record lows, of 35 and 28 days, respectively. This is a trend that has been consistent throughout the pandemic: Since 2019, the proportion of used cars priced under $20,000 has fallen by half, from 53% of the used market to just 27% today.
“Headed into the second half of the year, we will continue to see tension between interest rates and strong consumer demand,” Ryan said. “While demand is incredibly high at the upper end of the market, consumers who rely on financing are struggling not only with increasing interest rates and more limited financing options, but also with the reality that there are fewer and fewer affordable vehicles on the market. Consequently, sales of older cars have fallen in the past several months as many consumers find themselves priced out of this part of the market.”
Teslas are the used car market’s one bright spot. Since last summer, prices of Teslas and other electric vehicles have declined in tandem with gas prices, which peaked in July after a run-up in the spring of 2022. Used Tesla prices continue to plummet, dropping 33% (or $23,500) since last summer’s peak, and down 8% (or $3,944) since the EV pioneer first announced price cuts to some of its new models in January 2023. In May, used Teslas, with an average price of $47,578, have become the first brand to reach normal price levels, now listed $1,598 (or 3%) below projected normal levels.
“A used Tesla is a screaming bargain, down 33% compared to a year ago, even as comparable gasoline-powered cars are going up in price,” Ryan said. “But buyers need to be on their toes because Elon Musk’s approach to pricing and discounting is disrupting the entire market, bringing unprecedented volatility as new Tesla price changes flow through to used models, and force reactions from competitors.”
About CoPilot
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. Follow CoPilot on Twitter here for original data and insights.
Media Contact:
Kerry Close
732-609-2644
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