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What goes up, must come down, and someone’s going to lose money. In this case, it’s most likely going to be car dealers on the losing end of the market.
Used car prices climbed 52 percent in 2021 and 2022, an unprecedented and historic price bubble that is slowly but surely bursting. The average price paid for a used car peaked at $33,000, an all-time record. But times are changing! Higher interest rates, rising new car inventory and fears of recession put an end to the madness as 2022 came to a close. In 2023, used car prices have much further to fall. The latest data from Black Book paints a picture of falling prices, and ultimately, perhaps a sense of normalcy.
Let’s take a look at what the latest used car price data reveals, and what our team of auto experts and consumer advocates expect for used car prices in 2023.
The Latest Used Car Price Update
Used car prices, 2019-2023. Source: Black Book
Used car prices are falling, but let’s not forget where we’re at, and where we’ve been. Black Books’ 2022 Year in Review puts used car prices into perspective remarkably.
“The average wholesale price of a 4-year-old vehicle at the beginning of the pandemic in January of 2020 was about $13.5k. At the end of December 2022, the average wholesale price of a 4-year-old vehicle was about $21.9k – almost a 60% increase above the pre-pandemic norm (so, a $10k car from early 2020 would cost about $16k right now).”
Used retail prices have fallen, but are STILL about 35% above pre-pandemic levels.
After six months of wholesale price declines, there’s still a long way to go before reaching some semblance of normalcy and price stabilization.
Data from Edmunds shows where the retail used car market stands heading into 2023. The average price of a used car in December was $29,533, down nearly $1,600 (-5%) from the record high of $31,095 reached in April 2022.
Today’s average used car price is about the same as the average NEW car price in 2010.
This week, used car prices continue to fall. Data from wholesale auctions is what you could call the pulse of the used car market. Typically, trends in wholesale prices are reflected in retail pricing three to six weeks after auction.
2023 has kicked off with wholesale used car prices continuing to fall. Last week, the overall market fell -0.79%. In recent weeks, luxury and near-luxury cars and crossovers have been falling the quickest, by nearly 2% week-over-week in some luxury segments.
Used car prices, January 2023. Source: Black Book
All nine car segments decreased last week, with three reporting declines greater than 1% (Prestige Luxury, -1.76%; Near Luxury, -1.28%; Compact, -1.18%). Compact Cars reported the largest decline for the segment since early November.
Used SUV and truck prices, January 2023. Source: Black Book
All thirteen truck segments reported declines last week, with three of those reporting a decline of over 1%. However, prices for used full-size trucks have been slowly falling after steeper drops in 2022. The average price paid for a used truck is $37,000, compared with $60,000 for a new full-size truck.
The average down payment for new and used cars hit record highs in 2022, climbing to $6,780 and $3,921, respectively. Car buyers are putting more money down to do what they can to offset the higher cost of borrowing money.
About 40% of used car purchases are financed, compared to nearly 84% for new cars. Unsurprisingly, these figures are in a steady decline as car prices have raced beyond most buyer’s budgets.
Paying cash for cars is not a bad idea, but you may be missing out on the best deal if you do. This sounds odd, and it’s definitely worth exploring further if you’re in a position to pay cash. Be sure to check out this guide to paying cash for cars!
Predictions For Car Prices in 2023
Our own Ray Shefska recently shared his biggest predictions for 2023. With over 40 years in the business, Ray’s insights touch on both the usual suspects and some surprisingly unsung themes of today’s auto market.
These are Ray’s big predictions for 2023:
1. New car inventory will continue to grow
2. Used car affordability will continue to keep sales volume down
3. Rising interest rates will lower demand and worsen affordability
Before you head to the dealership to negotiate a deal, check your loan balance for your trade-in. According to Edmunds’ analysis, 17.4% of new vehicle sales with a trade-in had negative equity in Q4 2022, up from 14.9% in Q4 2021. Negative equity is when you still owe more than the car is worth at the time of trade-in. Having negative equity will add to the amount of your next auto loan, making payments higher, and resulting in even more interest paid over the life of the loan.
How can you avoid ending up ‘underwater’ with negative equity? The easiest way is to have a larger down payment, typically at least 20%. Factors such as depreciation and interest rates weigh heavily on how long it takes to pay down an auto loan.
Use this car depreciation calculator to see how quickly particular models are likely to lose value over time. It’s better to be informed than to be in over your head with auto loan debt.
We recently shared the 2023 models with the biggest price hikes. Now, we’re back with the cars and trucks with the smallest price hikes for the 2023 model year. I must say, there are some surprises here. We’ll start off by taking a look at the price trends for the 25 best-selling models in 2022. Unfortunately, Honda grabs the attention with some of the most anti-consumer price changes in recent memory.
Let’s dive in.
The 25 Best-Selling Cars in 2022 + Pricing For 2023
The table below shows 2023 pricing for base models and mid-spec trim options in an effort to provide more useful price comparisons. We’ve included how much the 2023 pricing has changed as a percentage.
Notice that two of the top-selling models actually have price decreases for 2023. And after years of demand outpacing supply, Tesla prices are holding steady. Still, the vast majority have MSRP increases between 3% and 10%.
2023 Ford F-150 Price Increase
America’s best-selling vehicle is now a lot more expensive. The 2023 F-150 Lariat, the popular mid-spec truck, is now $8,440 more expensive. The F-150 Limited sees a similarly huge price bump, and now tops out at $85,950. Apparently the F-150 now has Super Duty pricing. The F-150 Lightning went from a $40,000 electric truck, to a $60,000+ EV.
Tesla Prices in 2023 (UPDATE)
Update January 16th, 2023: Tesla has slashed their prices by up to 20% for some models.
What the heck is going on at Tesla? Overnight they dropped the price of the Model Y Long Range to $52,990, a full $13,000 less than its previous price of $65,990. 🤯 pic.twitter.com/EcZo6wXIiY
Tesla prices rose 25% from 2021 through early 2022. Now, prices haven’t changed since June 2022. In China, Tesla prices have actually fallen, leading to in-store protests from frustrated customers who bought a few days too soon. The Rear-Wheel Drive Model 3 does now qualify for up to $7,500 in federal tax credits. More on that here.
It’s a frustrating trend, one that we hope Honda fans will speak out against. Honda clearly wants you to spend more in 2023. As with the CR-V, they’ve dropped the base Civic LX, effectively raising the entry-level Civic to $26,145 in 2023. It’s happening to the 2023 CR-V too. Honda eliminated the base LX trim, forcing a nearly $5,000 price increase for the entry-level CR-V.
At least Honda is offering several more options for those wanting a hybrid powertrain in 2023. The Sport, EX-L, Sport-L and Touring trims all come as hybrids. The 2023 Touring Hybrid starts at $38,985, which is $600 LESS than the 2022 Accord Touring.
The Cars, SUVs and Trucks With the Smallest Price Increases
The Ford Escape Gets New Looks and Lower Pricing
The 2023 Ford Escape gets a complete makeover, and with it comes a new trim lineup. That makes price comparisons tricky, but like for like, the 2023 Escape’s pricing remains about the same. In fact, the 2023 Escape ST-Line is $1,000 cheaper than the outgoing 2022 Escape SEL, its closest analog. Higher trims of the 2023 Ford Explorer also see steady prices.
We can’t say the same about other Ford models. The F-150 is seeing prices go up by 7% to 17% in 2023, and the all-electric F-150 Lightning now costs about $20,000 more than it was originally priced.
Toyota Offers the Closest Thing to a Deal
Toyota Corolla prices have actually gone down in 2023 for the Hybrid LE as Toyota makes way for the new hatchback Corolla. The 2023 Corolla Hatchback SE starts at $24,060 with destination fees.The Camry and Highlander also saw very minor price increases, with prices going up by about 1% across trim levels.
The Nissan Altima Continues to Slip
Altima prices nudged up slightly, but that’s no surprise. Nissan’s Altima sales have been on the decline for years now. In 2019, Nissan sold 209,000 Altimas in the U.S. In 2022, Nissan sold 140,000 Altimas in the American market.
Where to Find the Deals in 2023
New car prices are trending ever higher, even as supply finally catches up to demand. So, where are the best car deals in 2023? Head on over to the used car market for lower prices. Used car prices have been falling for several months, and we expect this trend to continue. Here are some CarEdge resources to get you started on your journey:
What a year it has been. 2022 started with new and used car prices climbing to record highs, stubborn semiconductor chip shortages and a world at relative peace. As we wrap up the year and look forward to 2023, used car prices are tanking, new car inventory is rising, and global conflict has shaken everything from gas prices to automotive suppliers, in addition to affecting millions of lives. Our very own Ray Shefska has these 5 predictions for 2023, informed by over 40 years in the auto industry. Let’s dive in.
1. New Car Inventory Will Continue to Grow
As we head into 2023, new car inventory is the highest since May 2021. That was when the semiconductor chip shortage sprang out of pandemic shutdowns, throwing the automotive industry into a downward spiral. The latter half of 2022 saw automakers slowly but surely climb back from the brink of empty lots, but the recovery is still underway. Manufacturers can make more cars today than they could a year ago. (See the latest new car inventory numbers here.)
But it’s not just easing supply constraints giving us hope for more new car inventory. Consumers are holding back on discretionary spending, and in many cases, that includes shiny new cars. Others are simply getting priced out of the new car market as MSRPs continue to rise. Check out the biggest MSRP increases for the 2023 model year.
As more cars are produced with fewer buyers on the market, new car inventory will grow in 2023. Those dealer lots won’t be so empty in six months’ time.
2. Used Car Affordability Will Continue to Keep Sales Volume Down
From early 2021 to mid-2022, used cars became so absurdly overvalued that even with 5-10% price drops in recent months, they still have very far to fall before prices are anywhere near historical norms. Lower prices and reduced dealer profit margins will be unable to overcome higher loan interest rates enough to offset affordability.
Dealers are making less money with each used vehicle sold, and they’re going to be doing their very best to squeeze every additional dollar out of used car sales, even as we transition from a seller’s market to a buyer’s market.
3. Rising Interest Rates Will Lower Demand and Worsen Affordability
Interest rates for auto loans have doubled since 2021. As of late December 2022, the average used car loan APR was close to 10%, while used car loan APRs averaged 5%. Just how much does a bump up from 5% to 10% APR matter? Let’s run through some frightening math.
According to data from Experian, the average amount financed reached $41,665 for new vehicles and $28,506 for used vehicles in the third quarter of 2022. Let’s meet halfway at $35,000.
At 5% APR with a 72 month loan (we suggest sticking to 60 months or less), total interest paid comes out to $5,584. At 10% APR, this same loan will charge the borrower $11,685 in interest. Cars get a whole lot more expensive when taking the cost of borrowing money into account.
The Federal Reserve has indicated additional interest rate hikes are likely, although they could be smaller than the most recent 50 basis point increase. In a best case scenario, auto loan interest rates could peak at some point later in 2023.
4. Manufacturer Incentives Will Increase
Simply put, auto manufacturers will be looking for more ways to drive up demand for their new cars in 2023. It doesn’t take a genius to see that the easiest way to do that is to lower prices, especially following month after month of MSRP hikes.
Analysts at Cox Automotive found that the average incentive spend in November 2022 was $1,066, a 43% decrease since November 2021. Who will offer incentives first, the dealer or the manufacturer? We think 2023 will bring a bit of both as demand continues to soften.
We track the best new car incentives, updated monthly. Be sure to bookmark these pages if you’ll be in the market to buy or lease in 2023!
All-cash car purchases are expected to climb to levels not seen in decades this year. It’s all about interest. Borrowing money is so expensive right now that a cash purchase is by default preferred by money-savvy consumers. Others are financing with the dealer to get a better trade-in value, only to pay off the loan weeks later. But there’s another dynamic at play here.
The post-pandemic economic recovery has been characterized by a new phenomenon that some economists are calling a ‘k-shaped recovery’. Essentially, some Americans are doing better financially now than ever before. They were fortunate enough to stay employed in 2020-2021, and with a whole lot less to do (and spend money on), their bank accounts are looking healthy. Others are still struggling to get back to where they were financially before COVID.
The result of the ‘k-shaped recovery’ can be seen in 2022’s healthy luxury sales, despite a shaky economy.
A Buyer’s Market in 2023?
Taken together, does this mean it will be a buyer’s market in 2023? With interest rates soaring to levels not seen in over a decade, it’s not the type of buyer’s market we’d like to see, but it’s an improvement.
The good news is that in 2023, car buyers will have more negotiating power than in 2022. And we’re here to help!
Not sure where to start? Check out these no-strings-attached free guides:
There’s a troubling trend emerging in the auto industry. Automakers are dropping base models from their lineups, effectively increasing the starting price by thousands of dollars. Toyota, Honda, Mazda and Kia have all done this in recent months, and it’s likely to continue in 2023. New car prices are increasing in 2023, but prepared buyers can still negotiate to save money.
Here are 10 models seeing big MSRP increases in 2023, and how you can still negotiate a better deal.
Ford F-150 Lightning
2023 Ford F-150 Lightning Lariat, with 320 miles of range.
2023 Pricing: From $59,974 to $97,819 (+40% since 2022)
2022 Pricing: From $41,669 to $93,609
When Ford launched the all-electric F-150 Lightning in early 2022, the price seemed too good to be true for many reviewers. Was Ford really going to offer so much value for well under $50,000? It turns out that was indeed too sweet of a deal to last. Ford has since announced multiple price increases for the entry-level F-150 Lightning Pro. In 2023, the starting price of the Lightning Pro is 40% higher than the original price one year prior.
The all-new Kia EV6 and it’s sibling the Hyundai IONIQ 5 were welcomed with rave reviews. Up to 310 miles of range, ultra-fast charging and unique looks, what’s not to like? Perhaps the EV6 is too popular, because Kia raised the starting price by $7,100.
Dropping the base model is a troubling trend, and Mazda is jumping onboard. With the elimination of the Mazda CX-9’s base model, the starting price of the CX-9 has jumped 8.4% to $40,025.
You know new car prices are increasing when Honda bumps prices by 16%. The CR-V is moving further and further away from the budget label it once wore. By percent increase, the CR-V’s 2023 pricing has increased more than almost every other mainstream vehicle on the market. At least it looks sharper with the refreshed design.
Back in 2019, a Tundra could be bought brand-new for under $33,000. Today, your more likely to see starting prices closer to $40,000. The days of full-size trucks under $30,000 are gone.
It feels like just yesterday that the Compass was available for under $25,000 with incentives. Today, the Compass starts well over $30,000 out-the-door.
Although the base Palisade gets a more modest $1,600 price bump, the trim level most buyers will be interested in, the Palisade XEL, goes up by $2,300 in 2023.
Honda decided to drop the cheapest base model of the 2023 Civic. After dropping the Civic LX base model, the entry-level price for the Civic climbed by 8%.
Used car prices are down 17% at the wholesale level, and retail prices are finally coming down. New car prices remain at all-time highs, reaching a new record average transaction price of $48,681 in November. Will new car prices drop in 2023? It depends if you’re shopping new or used. Expect used car prices to continue a steady decline through at least the first half of 2023. For new cars, it’s a bit more complicated.
With new car prices, most analysts agree that the best we can hope for in 2023 is competitive financing offers (even as rates rise), the return of incentives to an extent, and hopefully the end of dealer markups for most models. With the 2023 model year pricing, automakers have raised sticker prices by 3% to 8% for most models. New car inventory is finally climbing out of the semiconductor-driven shortages of late 2021 and early 2022, but automakers don’t plan to even return lot inventory to normal? Why? They now know that they and their dealer networks can make a lot more money by keeping inventory slim, doing their best to keep the auto market in a perpetual ‘buyer’s market’.
With the new and used car markets on the verge of lower prices, it’s time to put negotiation skills to work to save money on your car deal. Our team of Car Coaches is made up of industry pros with decades of experience selling cars for dealerships around the United States. Now, they’re sharing industry insights that dealers don’t expect you to know, all with the goal of saving you money, time and hassle.
Here are some 100% free resources our team of Car Coaches has created to help you navigate car buying in 2023.
If you’re looking for a used car deal this year, understanding the ins and outs of today’s changing used car market is key to saving more. In 2023, car buyers who are empowered with knowledge and negotiation know-how will save the most money. Those who are caught off guard are destined to overpay. At CarEdge, we’re real people helping you save real money. Our team is sharing which used cars are likely to have the best deals in 2023, and what to be mindful of along the way.
Used Car Prices Continue to Drop – Some More Than Others
At the wholesale markets, used car prices have steadily dropped since mid-2022. Industry analysts are noting price declines on every front. As of November’s data, the Manheim Used Vehicle Value Index shows that used car prices are down 14.2% from one year prior. Digging into the details, we can see that some used car segments are dropping faster than others.
SUVs (including crossovers) have seen prices drop the most over the past year, dropping -16.4% since November 2021. Next up are luxury cars, which have had prices drop -15.6% on average over the past year. Here’s the year-over-year price drop breakdown for the vehicle classes with the greatest price declines, as of early 2023:
SUV/crossovers: -16.4%
Luxury cars: -15.6%
Midsize cars: -14.4%
Trucks: -11.9%
Vans: -11.6%
Compact cars: -10.6%
Full-size cars, subcompact cars, sports cars and luxury SUVs/crossovers all saw prices drop year-over-year, but saw declines below the overall industry average.
See the latest used car price data from Manheim here.
In 2022 (green), car prices began to decline.
Black Book’s used car price data shows the same picture overall, with greater resolution. All 22 vehicle classes in Black Book’s wholesale used car auction weekly analyses have seen prices drop over the past six months. Wholesale transaction prices are easiest to track, hence the industry-wide focus on them.
Typically, wholesale price trends are reflected in retail prices with a 3-6 week delay.
At the wholesale level, used car prices began to fall in the overall market in mid-June of 2022. By early August, retail prices were also dropping. By 2023, retail used car prices had been dropping for nearly five months. Generally, used vehicle classes that saw the most price appreciation in 2021 have seen the greatest price drops, as they’ve had the farthest to fall.
According to Black Book transaction data, these are the used car segments with the greatest drops so far:
Luxury cars
Luxury SUVs/crossovers
Mainstream SUVs/crossovers
And these are the used car segments with the smallest price drops:
Vans
Subcompact cars
Sports cars
Understanding market price trends is the first step towards becoming a well-prepared used car buyer in 2023. Will these trends continue? Let’s take a closer look.
Be Wary of Depreciation in 2023
Used car prices are very likely to continue dropping in 2023.
Why are used car prices so likely to drop further?
New car inventory is now the highest it has been since 2020. More buyers are considering new models, reducing demand for used cars.
Interest rates for auto loans have doubled since 2021. The average used car loan APR is now close to 14%, while new car loan APRs average 14%.
Fears of an economic recession have led more would-be buyers to save a bit more, and spend less. More on how recessions affect car sales and prices here.
What does this mean for you if you’re likely to buy a car in 2023? Don’t overpay, because the deals will be out there.
The Best Used Car Deals in 2023
Our team of CarEdge Auto Experts help car buyers negotiate amazing deals every day. They’re as knowledgeable about the used car market as it gets, and they put their auto industry know-how to use saving our members money. These are the used vehicles they expect to have the best deals in 2023.
Phil, CarEdge Auto Expert: “I think the compact and midsize crossover segments will continue to see good deals. For example, Toyota RAV4s and comparable crossovers continue to see declines in retail pricing. This falls in line with compact to midsize vehicles. These have seen the highest appreciation in the last 12 months, and now they are seeing a large decline to offset that. Also, anyone looking for a used luxury vehicle should see some continued deals with values coming down.”
Jerry, CarEdge Auto Expert: “I expect to see deals/prices improve in near-new vehicle segment, primarily full-size trucks. As new vehicle shortage is improving, deals and incentives are improving, which will slowly bring back the price relationship between new and used prices. We are already seeing this, as there are discounts to be found of up to $8-10k on new, full-size trucks. This will push down the prices of near-new. Deals/availability in the up-to $20k segment will continue to be challenged.”
Mario, CarEdge Auto Expert: “With increasing incoming units and in-stock inventory on dealer lots (Toyota, Audi, BMW, Hyundai, Honda, and Subaru, for example), we are slowly moving away from reserving allocations or factory ordering, except for low volume models like EVs and Hybrids. For domestics it will always be an option, but even F150s and Wranglers have good stock on the ground in big markets.”
Justise, CarEdge Auto Expert: “Used sedans, and trucks are the best segment. Honda is still hard to negotiate but everything is getting much easier. The best deals are on Toyota, with new prices finally so negotiable used Toyotas can be gotten for a steal. All Jeeps are still very negotiable right now.”
Our CarEdge Coaches were quick to point out that so much has changed in the auto market over the past six months, and that a lot more will change before 2023 ends.
How to Save Money Buying a Used Car
CarEdge is the largest consumer advocacy in the auto industry today. We help real people save real money on car deals. That’s why we share hundreds of free guides and resources in addition to the full benefits savings available for our members.
Shop Needs Versus Wants
If you need a family hauler, say no more. But how many seats do you really need? It’s worth thinking about. Does it make the most sense to buy a vehicle for an outlier use-case scenario, such as taking one or two big road trips per year? Usually, it doesn’t.
For example, consider the differences in MSRP and fuel economy between a popular three-row SUV and a crossover. The 2023 Hyundai Palisade Limited starts at $46,800, but the slightly smaller 2023 Hyundai Santa Fe Limited starts at $40,050. Take it down a step further, and you can get a Hyundai Tucson Hybrid for under $39,000. That would be 37 miles per gallon in the Tucson Hybrid, compared to just 22 MPG in the Palisade, totaling $800 in annual fuel savings for the average American driver.
Take the cost of financing and fuel into account, and you’ll quickly realize that A LOT of money can be saved by shopping for everyday needs, rather than wants or ‘what ifs’.
Get the Lowest Rate Possible
Did you know that the average interest rate APR for a used car purchase is nearly double that of a new car? Sad, but true. According to Experian, The average auto loan interest rate was nearly 8% APR for new cars and 14% for used cars in late 2023. While percentages may seem insignificant on the surface, they have a huge impact on your monthly payment, and how much total interest you’ll owe over your loan term.
Don’t Buy Without a Pre-Purchase Inspection
A pre-purchase inspection is a vehicle inspection that an independent mechanic conducts in advance of a vehicle sale. There is no universal checklist of what constitutes an inspection, but experienced mechanics tend to have their own methodology. Pre-purchase inspections (commonly referred to as PPIs) are simply a mechanical review of a vehicle in advance of a sale.
Ready to outsmart the dealerships? Download your 100% freecar buying cheat sheets today. From negotiating a deal to leasing a car the smart way, it’s all available for instant download. Get your cheat sheets today!
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