Highlights
- Used car prices may stabilize, yet inventory shortages and high financing costs persist.
- Explore federal tax credits for used EVs to capitalize on shifting market trends.
Market Overview and Trends
The U.S. used car market has seen notable fluctuations, with prices rising sharply in the early 2020s before moderating in 2023. By September 2023, retail prices returned to early-year levels after erasing earlier gains. Despite some easing, buyers face challenges due to inventory shortages, high financing costs, and limited affordable options under $25,000. Supply constraints stem from supply chain disruptions, new tariffs, and changes in leasing and rental car replacement cycles reducing near-new vehicle availability. Policy measures like federal tax credits for qualifying used electric vehicles (EVs) aim to boost demand in emerging segments.
Used car prices remain elevated, with an average list price around $25,945 as of late 2023. Dealer incentives and increased supply are beginning to ease price pressures amid rising interest rates. The introduction of newer 2026 models has influenced new car pricing, indirectly affecting used car values. Leasing trends and shifts in consumer preferences toward luxury cars, pickups, and crossovers have driven price increases in these categories, while used EV and hybrid prices have declined.
Factors Affecting Buyers
Used car prices are expected to stay high through 2024 due to supply constraints and economic pressures. Inventory remains tight, especially for vehicles under $10,000, intensifying competition. Financing costs have risen, with average loan rates exceeding 11%, adding strain for many buyers. Thorough vehicle inspections are essential to avoid hidden issues, and understanding warranty coverage and return policies helps protect buyers from unexpected costs. Rental cars sold by agencies offer discounted options but still require careful inspection. Leasing has become more popular, influencing vehicle availability and pricing.
Used Electric and Hybrid Vehicles
The used EV and hybrid market is growing, with battery health a key concern. EV batteries degrade at about 1.8% per year, typically lasting beyond the vehicle’s useful life. Manufacturers usually offer warranties covering battery capacity for eight years or 100,000 miles. Maintaining battery health involves best practices like avoiding extreme charge levels and minimizing fast charging. Financial incentives and expanding charging infrastructure support used EV adoption, especially in regions like California and the Southeast United States.
Popular Models and Market Shifts
Luxury cars, pickups, and crossovers have seen price increases due to demand, while hybrids and EVs have declined in value, creating opportunities for eco-conscious buyers. The availability of affordable vehicles under $25,000 has sharply decreased over five years, leading many buyers to seek value in used cars within the $15,000 to $30,000 range. Older models are gaining appeal for their unique features and investment potential.
Buyer Guidance
Buyers should carefully review warranty coverage, return policies, and sales agreements before purchasing. Conducting thorough vehicle inspections, ideally with a trusted mechanic, helps avoid costly problems. Extended warranties and service contracts can provide added protection, especially for vehicles purchased from dealers. Negotiation remains important, with dealers often willing to offer better deals amid current market conditions.
Environmental and Future Outlook
Environmental concerns are driving increased interest in EVs, supported by advancements in charging infrastructure and battery technology. The used car market is expected to remain dynamic through 2024 and 2025, with supply gradually recovering but prices staying elevated due to ongoing new vehicle shortages and economic uncertainties. EV adoption will continue to grow, influenced by technological improvements and policy incentives, although infrastructure challenges persist. Policy changes and tariffs add further unpredictability to market conditions, affecting pricing and availability across vehicle segments.
The content is provided by Blake Sterling, Scopewires
