Cracks in the Dam: As Consumer Demand Weakens, Used Car Price Drops Accelerate
Battered by multiple interest-rate hikes, gas prices, and fears of recession, consumers will no longer pay record-high used prices
With sales slowing, dealers are being forced to make their first substantial price cuts in two years, finally pushing the market back toward normal levels
Chicago, IL – October 4, 2022 – After two years of elevated used car prices, consumers are sending a clear message that they are no longer willing to pay record-breaking used car prices. Used car prices that surged 50% since 2020 have fallen steeply from peak levels in July, as inflation and interest rates put a car purchase out of reach for many Americans. This decline in demand is fast-tracking the market’s return to normal, with almost all age brackets, segments, and brands seeing accelerating price drops over the past two months, according to new data from the monthly Return to Normal Index report from leading car shopping app CoPilot.
“This pattern of price drops marks a new phase of demand destruction,” said Pat Ryan, CEO and Founder of CoPilot. “Amid multiple interest rate hikes, and with the looming possibility of recession, car buyers are understandably far more cautious. They’re no longer willing to pay crazy high prices, and as a result we’re seeing dealers cutting prices across the board, by significant amounts, for consecutive months. This is a powerful indication of serious cracks appearing in the used car market.”
This trend is clearly represented among nearly-new (1-3 year old) cars, which consumers have favored as substitutes for new cars, whose supply fell to record lows amid the pandemic. While 1-3 year old cars had risen the most in price over the past year, they are now falling the fastest (down over 5% from their peak just two months ago). Similarly, America’s favorite cars – crossovers and sedans – are down in price almost 2% in two months, and their 1-3 year old models are down more than 4% during the same time period. CoPilot found that all major brands experienced a drop in used car prices – with domestic makes dropping more substantially than foreign brands.
With gas prices still nearly 20% higher than last year, gas-guzzling segments like SUVs and pickup trucks also continue to trend down in price. Used SUVs – the segment with the lowest Price Premium (closest to returning to normal) – have seen the most substantial declines, with 1-3 year old SUVs falling by 4% in price in the past two months, and by 7% since their March peak. Even used electric vehicles and hybrids, whose prices skyrocketed along with fuel costs starting in early March, have seen massive drops, down 11% and 8%, respectively, since their July peaks.
Despite these signs, used cars overall remain 33% – or $8,110 – above projected normal levels. As sales stagnate, dealers are seeing used inventories increase – a reversal of the pandemic-era trend in which used car supply fell to near-record lows. In particular, 1-3 year old vehicles – which are still listed at 35% above their projected normal price levels – saw an 11% increase in inventory over the past three months, in part a result of consumers being priced out of the market.
“Though the market is definitely falling, our advice to consumers is to wait a little longer if you can. It still remains one of the most challenging markets in history to buy a car,” Ryan added. “That being said, we really foresee that the dam is finally starting to break – and within the next two quarters, we can expect prices to fall much further and faster. Consumers should keep an eye out on the market and be ready to make a move when their desired vehicle finally approaches normal pricing levels. And if you have a car to sell or trade-in, now is the time – the price is only going to continue to fall from here.”
CoPilot is a leading, data-driven car buying app that provides consumers with an expert partner for the high-consideration purchase process 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 embeddable data tools, allowing journalists and bloggers to integrate interactive charts within their web content, apps, or newsletters, powered by CoPilot’s unique data and analytics.