When Will Used Car Prices Drop?
Alex Healey
· 4 min read
Unless you’ve been living in a cave (and I’m considering it), you’ll be aware that the cost of goods has skyrocketed over the last two years.
Used cars
are no exception. The inventory shortages we were seeing last year have continued into 2022, and used car prices are now at an all time high.
While used cars are still cheaper than buying new, good deals are extremely hard to find, and drivers are wondering when prices will come back down so they can buy or sell their used vehicles at the most time. Thankfully, used car prices are expected to go down in late 2022 as the global chip shortage alleviates.
Nobody can predict the future, but industry experts are attempting to figure out the state of used car prices. Read on to learn more about the current used car market.
The current U.S. car market
It's no secret that used car prices have been on the rise. According to Edmunds, used car prices in December 2021 rose a whopping 14% from the previous year. So what's causing these high prices?
For one, there's a higher demand for vehicles right now. IHS Markit projects that there will be 15.5 million US car sales in 2022, which is a 2.7% increase from the previous year.
Additionally, there's a major chip shortage in the market right now. These chips are essential bits of technology for your vehicle. Between high demand for products that use these chips and slowed production due to the COVID-19 pandemic, used car prices saw an
increase of 19.1% year-over-year
, with an average used vehicle price of $25,904 at dealerships.
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Which vehicles are most affected by the price increases?
Older used vehicles have seen a larger increase in value than newer used vehicles. And while demand for pickups and SUVs has been through the roof, normal cars—such as sedans, hatchbacks, coupes, and crossovers—actually saw the highest price increases.
This is because new car production was affected more severely than that of SUVs and trucks, with automakers directing their limited resources towards the more expensive larger models.
That’s not to say these vehicle types didn’t increase in price—they absolutely did. But the rate of increase was lower, relative to used car values.
Here is the data from
Cars.com
, showing the rise in median pricing for used vehicles, between December 2019 and December 2021:
-
Used cars (defined as sedans, coupes and hatchbacks) increased 40%-52%.
-
Used pickup trucks increased 23%-48%.
-
Used SUVs increased 32%-41%.
When will used car prices come back down?
MORE: The Best Used Cars You Can Get for Dirt Cheap
Used car prices are at the mercy of new-vehicle production, which is expected to recover by the end of 2022. Therefore, we can expect used car values to return to normal by late 2022 or early 2023. Unfortunately, that does not mean a return to pre-pandemic prices, but KPMG predicts a drop of 20-30% in the months after October 2022, and J.D. Power insiders predict a “new normal” where used prices are 54% of new (currently 68%).
Automotive experts corroborate this, with many believing that the chip shortage will come to an end in late 2022.
So there you have it. If you are wondering whether now is a good time to buy a used car, the answer is “No!” But if you’re willing to hold out for another 9 months, you could save thousands of dollars.
You might overpay for a used car, but you don’t have to break the bank on insurance. For the best offer on that, try using the
Jerry
app. A licensed broker, Jerry can source quotes from almost 60 top insurance companies in less than 60 seconds. That’s right, in under a minute you’ll see offers from State Farm, GEICO, Progressive, and more! The average user saves almost $900 per year.
