In today's economic landscape, the used car market is undergoing significant changes. The drop in used car pricing is presenting both challenges and opportunities for buyers and dealers alike. Let's delve deeper into these trends and understand how they are shaping the market.

Uncover the Secrets of the Used Car Market

Trends in the Used Car Market

The average price of a used car has seen a notable decline, currently standing at around ,000, which is about 4.7% lower than the previous year. This drop is a relief for consumers who have been patiently waiting to make a vehicle purchase. However, it's important to note that these prices still remain above pre-pandemic levels.

Consumer affordability and access have shown slight improvements. In 2019, ,000 could grant access to 50% of the one-to-five-year-old used car market. But by 2023, this number had drastically dropped to 12.7%. Fortunately, in 2024, it rebounded to 16.5%, representing a 30% improvement compared to the previous year. Although it is still below the 2019 levels, it indicates a positive shift in the market.

Mileage and Vehicle Age

Between 2019 and 2023, buyers had to shell out more money for used vehicles with higher mileage. Currently, the average mileage on used cars is 39,000, a 2.8% decrease from the previous year. Historically, dealers were accustomed to seeing used vehicles between three and four years old with an average mileage ranging from 50,000 to 60,000. However, due to consumers holding onto their vehicles for longer periods, dealers are now encountering used cars with up to 90,000 miles.

The Role of Interest Rates

Rising interest rates have put pressure on buyers, leading them to seek more affordable vehicles. This has dampened the demand for higher-priced cars. In response, dealers have been forced to reduce prices and offer increased incentives to entice buyers back into the dealerships. The used car market is adapting to these changing conditions.

The EV Market's Influence

The EV market has also played a significant role in the declining used car pricing. Used EVs, which were previously slow sellers, are now selling at a faster pace due to substantial price reductions. The average cost of an EV is between ,000 and ,000, which is approximately ,000 less than its combustion engine counterparts. This shift is attracting more buyers to the used EV market.

The Gap between New and Used Car Pricing

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 been getting creative by offering extremely low monthly pricing and incentive programs. As a result, leasing has seen a significant increase.

While the used car market in 2024 presents a mix of challenges and opportunities, with prices trending downward, great incentives, and more affordable vehicles within reach, consumers are gaining more confidence and actively shopping. As Karl Brauer aptly stated, "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." This trend is likely to continue shaping the used car market in the coming years.