As the economy continues into recession, used car prices continue to fall. Prices are down nearly 5% from September and nearly 9% from a year ago, according to an iSeeCars report. The Tesla Model 3 had the biggest price drop in six months, more than 21% since September.
Some of the drops in used car prices are the result of an influx of new cars onto the lots of many dealerships. But analysts say prices may turn around in part because of the start of spring, a traditionally strong time for auto purchases due in part to income tax refunds.
“The used car market has fragmented over the past year,” says iSeeCars executive analyst Karl Brauer. “Although prices are still higher than before the pandemic, they have fallen steadily over the past year and at an accelerated rate in the past six months.”
He says dealers should carefully consider models and prices, especially before buying at auction. Other analysts advise dealers to rely heavily on data about consumer preferences in their markets and to seek alternative sourcing of used cars.
Brian Moody, executive editor of AutoTrader, notes that most of the vehicles with price drops are battery electric and hybrid vehicles.
“The weird thing about electric cars is that electric cars aren’t really a segment,” he tells Wards. “They are a novelty, and they only represent 5% or 6% of the market. Because you have such a small market segment, you can see a more direct relationship between them.”
Moody adds that many of the cars on the list are priced high, and consumers are generally looking for low-priced used cars due in large part to economic uncertainty.
“I’ve been hearing from dealers that it’s getting harder and harder to get quality used vehicles at a price that consumers are looking for,” he says. “And I think that’s going to be a little difficult right now.”
Kevin Roberts, director of industry insights and analysis at CarGurus, says the iSeeCars analysis of used car prices aligns with his findings. He notes that prices will ebb and flow as the market recovers from the chip shortage and retail slump caused by the pandemic. The current economic uncertainty will increase volatility. He adds that some prices may recover depending on fuel supplies.
“We saw rapid price increases (for BEVs and hybrids) when gas prices were rising in the spring of last year,” Roberts tells Wards. “It was kind of similar to what we saw in 2008 when gas prices went up, and everybody wanted a Toyota Prius.
“Teslas are priced much more in the luxury range. It’s going to be a limited range of buyers. But as you start to see more electric vehicles move into the $30,000 price range, I think it’s going to be a pretty attractive price point for consumers.
TrueCar industry analyst Zack Krelle agrees that consumers’ search for affordable options includes their need for shorter loans, especially as interest rates on used vehicles approach 11% .
“While we are expecting a slight rise in retail prices to materialize this month, the long-term trend has been down (about 10% lower year-on-year). The declines have not been entirely uniform, with some pockets that hold their value more than others,” he tells Wards.
“Surprisingly, many late-generation vehicles are experiencing the largest percentage price declines since a year ago. These models get a lot of attention because of high new vehicle prices, but they bore the brunt of high prices when they were new “.
