The price of the average used car is falling despite low inventories at many used car dealerships.
The average used-vehicle listing price at the end of January was $25,328 — down from a revised $26,505 at the start of January and down 4% from a year earlier.
Used car prices remain higher than in 2019 but have fallen lower than at any point in 2022 or 2023.
Related: Average New Car Price Tumbling
Fewer Cars, But Lower Prices
The price drop comes despite quickly contracting supply. Car dealers usually aim to keep about 60 selling days worth of cars in stock. Total days’ supply at the start of February fell to 49, compared with the revised 58 at the beginning of January.
Supply problems are “expected to improve later in 2024,” says Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive.
But issues will remain in some price ranges. For several years, dealers have been long on more expensive used cars and short on affordable ones.
The strange economics of the COVID-19 pandemic also choked off one source that usually supplies dealers with used cars. As the value of used cars rose, many Americans with leased cars chose to keep them rather than turn them in at the end of their leases. Additionally, low production of new vehicles in 2021 means fewer vehicles coming off lease, Robb says, resulting in fewer lightly used, recent model-year cars entering the used market.
Dealerships of some brands have more cars than those of others. Honda and Toyota were the non-luxury brands with the lowest inventory of used vehicles at the beginning of February. Lexus and Acura had the lowest supply among luxury brands.
Used EVs Showing Up In The Numbers
Analysts are starting to see a new trend impact the used car market for the first time — used electric vehicles (EVs). Long an afterthought in used car sales numbers, used EVs are starting to sell in numbers large enough to affect overall buying and selling trends. A new federal program offers Americans up to $4,000 in tax incentives on the purchase of many used cars.
Related: How Do Federal EX Tax Credits Work in 2024?
“EV talk is everywhere, and now even in the used-vehicle days’ supply discussion,” Robb says. “Used EV sales increased enough in January to help drive days’ supply lower.”
