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 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.
ABC’s Good Morning America recently caught up with Zach Shefska to talk car prices. See Zach on America’s most-watched morning show!
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.
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.
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.
Interestingly, Tesla’s massive price cuts are already impacting used EV valuations.
Our CarEdge Coaches recently shared which cars and trucks are most negotiable right now. Check out the latest info on how to negotiate car prices here.
Interest Rates Mean Cash Is King
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
4. Manufacturer incentives will increase
5. Cash is king in 2023
Curious to learn more about these predictions for the new year? Check out the full article here.
A Word of Caution
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.
Track Used Car Prices Weekly
If you’re in the market for a car in 2023, it’s important to stay informed as both new and used car prices remain volatile.
We track used car prices with weekly updates.
Add this used car prices updates page to your bookmarks, especially if you’ll be shopping for a new ride in 2023!