It appears that the car market is once again going through a phase. Used prices were strong for a while there, but the narrative has changed. Now, it appears that car parked on your front drive is losing value at quite a pace, and mine is too.
A few years ago, the car market was tripping out. Supply chains had seized up, so new cars were in short supply, and their prices naturally went up. With fewer new cars available, that pushed more buyers into the used market, and prices went up there too. There was a little bit of human craziness stacked on top, too. People panicked and tried anything to lay their hands on the vehicle they wanted. But fundamentally, it was supply and demand at play.
Fast forward to today. While some models are still scarce, normality has largely returned to car factories the world over. That’s had an impact on used car prices, which are finally coming down from their pandemic peak.
Take a look at the graph above from Cox Automotive. The average used vehicle price sits at just $25,571 today. That’s down a full 12% from May 2022, which recorded an average of $28,309 in comparison. While prices have seen a slight bump in the last month, they’re still a long way down on what they once were.
Data from Manheim tells the same story. The company’s Used Vehicle Value Index tracks used prices month to month, and the trend has been clear for some time now. The index began at a value of 100 in January 1997. As the average wholesale used car price climbed quickly during the pandemic, the index exceeded 260. Since late 2021, though, prices have been on a near-continuous decline. Today, the index sits at 199.1, almost halfway back to its pre-pandemic position of approximately 150. If all that sounds too complex, just look at what the line is doing and you’ll get the idea.
The sink in prices has become painfully obvious, particularly to those directly involved. Car commentator Doug DeMuro recently released a video on the topic himself, no surprise given he’s exposed via his auction business Cars & Bids.
“People are asking me all the time now,” said DeMuro. “One of the very first things they ask: is it collapsing?” He doesn’t use such calamitous terms, though. “This is normal!” he says. “It used to be, you bought a car, you owned it for a while, you drove it, it depreciated, and then you sold it for less than you paid for it.”
He notes that many customers that approach Cars & Bids are confused when they find out their car is worth less than a few years ago. For some reason, people have just baked the pandemic spike into their thinking, and they’re not realizing that used car prices more often go down than go up.
“New cars are coming back into stock, and used cars are becoming cheap again,” says DeMuro. “Not just cheap—cheap again, like they used to be.” He sees the drop in prices as a return to normality, not a collapse. “It was a great period to be in the car business, you were making a lot of money,” he says. He notes he was tinged with sadness as a car enthusiast, however, as nothing was getting cheaper or more accessible.
We’ve noticed these trends in The Autopian offices too. I’ve struggled to trim my own fleet. My Mercedes-Benz took a whole week to sell, even at a bargain price. I’ve had my BMW listed for a week with only two scam inquiries. It seems likely I’ll have to drop the price far more than I initially expected to get it gone.
Our own Stephen Walter Gossin is going through the same thing. “I’ve had my S-10 and New Yorker on sale for a combined total of over four months, have dropped the price by almost half on each and have had zero interest and zero showings!” he says.
What does this mean for you? Well, if you paid big for a vehicle a few years ago, you’re probably not gonna like the market price right now. That’s all the more true if you paid over sticker for something desirable like a Ford Bronco that is now in regular series production. Ditto the Cybertruck and other such examples.
But it’s not all bad news. If you’re buying right now, times are good. That car you thought you couldn’t afford two years ago is probably a lot cheaper right now. If you’ve been dreaming of something special, cast your eye across the classifieds. You might just find a rough diamond at an unignorable discount.
Image credits: usedcars.com via screenshot, Cox Automotive, Manheim, Lewin Day, Stephen Walter Gossin
I just sold my 2002 1.8T MT Passat wagon in reasonably good shape yesterday for 2400 or so. Was pretty happy that I could get that price given that I bought it >2 years ago for 3000. It took me <24 hours from listing to sale. In defence of the car I spent 30 minutes cleaning and prepping the car, took it through a car wash, took reasonably good pictures, and a cold start video, which probably set it apart from most cars being sold at that price point. I also patiently waited by the buyer took 2 test drives and spent 45 mins looking over the car. As I type this out, the time cost was probably not worth it, but ¯\_(ツ)_/¯.
I’m so glad I waited a year. I’d probably still be waiting except my Abarth threw a rod through the block, so that forced my hand. as it was, I waited almost 2 months and searched the whole country to find my 2018 JLU Wrangler at a decent price. it was one of 6 that ticked all my admittedly stringent and numerous boxes.
I could have saved a few thousand or maybe more if I’d caved on some of them, but I’m hoping to keep my Mojito Green Sport S hard top equipped 6 spd manual with heated seats/wheel, 7″ radio, and upgraded Rubicon 33″ wheels/tires for a decade or more, so I think the savings will mean a lot less by that time.
Everyone dreams of owning a modern wrangler for that long until the reliability starts kicking in.
If you are looking for a normal car under 10k, it is really challenging to find cars with a known history. Craigslist is dead and FB marketplace is all dealers masquerading as owners. I bought my recent car based on the previous owner as much as the car.
Are they? Or are they just better than it has been? By my eye estimation, the trend on that value index graph would put it at 160-170 right now if the pandemic never happened. Therefore, I’d expect current used car values to continue declining faster until that theoretical 30 point overage is gone. Of course, we don’t know for sure when values will hit a “floor” and start rising again, but chances are pretty good it will end up matching back up with that historical trend line. For now I don’t think we’re at the bottom of the current market drop, so “good” is only relative to the pandemic abnormality, not the normalcy we’re still waiting to get back to.
I’m shopping for an XC70 right now. Been watching prices all winter. I’m getting serious now that prices have come down closer to reality.
I love big depreciation cars and have been watching Cadillac CT6s, Lincoln Continentals and Volvo S90s. The caddys hold their value best, then Lincoln and Volvo.
Nobody wants a sedan anymore and I was hoping to capitalize on that. However, I’m thinking XC70 so when the kids are driving age, they can get it as a hand me down. I don’t imagine it would be wise to give them an overpowered luxobarge as their first car. They can have a nice dorky wagon on stilts.
/grump
Speaking of “used car values,” can someone indulge my prematurely old ass and explain who the hell at Carvana thinks cars should be treated like the stock market? They have this insidious ad where the wife tells her husband to “HOLD” their crappy minivan like they’re on the floor in Lower Manhattan, according to valuations helpfully provided by the Carvana app.
It was douchey as fuck. Especially in once scene where the lady is doing the lawn while dude is sitting with his feet propped up checking the value every now and again.
Waiting for LR4s to drop but it might not happen. A dealer in Carlsbad CA has two listed with low miles at $35K and $40K. Pricey considering some of the 2020 Defenders are getting into the high $40s.
I’m assuming trucks will be absolutely hammered. Times are tough and empty beds cost money.