The drop in used car pricing is making it slightly easier for buyers to find affordable options. In today’s episode of CBT Now, Karl Brauer, Executive Analyst at iSeeCars.com, examines the trends in the used car market and what dealers should expect moving forward.
Today, the average price of a used car is around $32,000, which is down about 4.7% year over year. This is an excellent drop for consumers who have been waiting to purchase a vehicle. However, these prices are still well above pre-pandemic levels.
Consumer affordability and access have slightly improved. In 2019, $20,000 could provide access to 50% of the one-to-five-year-old used car market. By 2023, that number had plummeted to 12.7%. However, in 2024, it rebounded to 16.5%. While it’s well below the 2019 levels, it’s a 30% improvement in the last year.
Between 2019 and 2023, buyers had to pay more money for used vehicles with more miles on them. Currently, the average mileage on used cars is 39,000, a 2.8% drop from last year. Historically, dealers typically saw used vehicles between three and four years old with an average mileage between 50,000 and 60,000; however, consumers were holding on to their vehicles longer, and dealers saw used cars with up to 90,000 miles.
Rising interest rates have pressured buyers to seek more affordable vehicles, dampening the demand for higher-priced cars. To entice buyers back into the dealerships, the prices of used cars have declined due to increased incentives and price cuts.
Brauer highlights that the EV market has also contributed to the declining used car pricing. Used EVs, previously slow sellers, are selling faster due to dramatic price reductions. The average EV costs between $26,000 and $27,000, roughly $6,000 less than its combustion engine counterparts.
Brauer also highlights that the rapidly growing gap between new and used car pricing has pushed many middle-class buyers into the used car market.
Dealers and manufacturers have also been getting creative to get vehicles moving by offering extremely low monthly pricing and incentive programs. In response to their efforts, leasing has seen a significant uptick.
While the used car market in 2024 offers a mixed bag of challenges and opportunities, with prices trending downward, great incentives, and more affordable vehicles within reach, consumers are gaining more confidence and shopping.
"What's happened is new cars have become kind of the domain of the wealthy… a lot of middle-class people who used to consider themselves new car shoppers, they're buying used now." – Karl Brauer
