Well, that was short lived.
After 21 straight weeks of appreciation, it had looked like used car prices were finally returning to normal (aka depreciating). Following the 21 straight weeks of appreciation, we experienced seven straight weeks of declining used car prices. This is the expected behavior in the used car market, because used cars become less valuable as more miles are put on them, and new vehicles make it to market. However, as we’ve documented extensively in 2021, we’ve seen used cars, trucks, and SUVs appreciate considerably.
The run of seven straight weeks of declines was short-lived. We’re now experiencing a reversal, and used car prices are increasing again. In this article we’ll break down the numbers and answer a few key questions such as; When is the best time to sell my used car to make the most money? When will used car prices go down again? And, how much higher will used car prices go?
Let’s dive in.
How fast are used car prices increasing?
To track the movements in used vehicle pricing we rely on data from Black Book. Black Book is an industry leader in providing vehicle valuations and data insights. They are a CarEdge partner and an industry authority.
Black Book’s weekly market insights report is full of interesting data. None more than the chart displaying weekly changes in wholesale used vehicle prices. Wholesale used vehicle prices are a leading indicator for what will happen to retail used vehicle prices.
|This Week||Last Week||2017-2019 Average (Same Week)|
|Truck & SUV segments||0.36%||0.09%||-0.12%|
The red line in the chart above represents zero change week over week in wholesale used car prices. Each dot represents a week. As you can see, for the past three weeks, wholesale used vehicle prices have been above the red line (cars, the blue line, have been above the red line for four weeks now).
Learn more about the chip shortage. Read: The How We Ran out of Cars in the US
Earlier this year we saw week over week increases in price of up to 2% across entire vehicle segments. Right now, price increases are more modest (at .43% for cars and .36% for trucks and SUVs), however our expectation is that price appreciation will increase in velocity. We would not be surprised if we see week over week price appreciation of 1%+ later in 2021.
Within the car segment we can get more granular on the week over week wholesale price changes.
Sporty cars are the anomaly here. Mid-size cars, compact cars, and sub-compact cars are leading the way in week over week price appreciation in the wholesale market. The seasonality that effects sports cars is likely at play right now (sporty car values typically increase in the spring and summer, and decrease in the fall and winter).See your local inventory levels
We expect to see used sub-compact and compact car prices continue to increase at rapid rates. This is because they represent the only segment of vehicle that is still moderately “affordable” compared to full-size cars, trucks, or SUVs.
Truck and SUV segment
We also have more granular data on the truck and SUV market.
Similarly to the car segment, we see the greatest price increase among the sub-compact and compact segments. This is again because those vehicles are at lower price points, making them more attainable for a broader buying audience.
Minivan prices are increasing at above average rates as well, and we expect that to continue. Minivans and full-size vans experienced truly remarkable appreciation earlier this year, and we would not be surprised to see that again.
How much higher will used car prices go?
Wholesale used car prices are currently up 36% from the beginning of this year.
You can see the weekly declines we had been experiencing on the purple line above. You can also see the increases we’ve now experienced for the past few weeks.
Retail prices are currently up 25% from when we began this year (again, the purple line).
Unlike wholesale prices, we have not seen any significant downward movement in used retail pricing.
Can wholesale and retail prices increase even more? We think so.
We would not be surprised to see an additional 10% increase in wholesale used vehicle prices and a commensurate 5-7% increase in retail used vehicle prices.
When will used car prices go down again?
Used vehicles can’t appreciate forever, can they? We don’t think so. Used car prices have increased in price because of the ongoing chip crisis and supply chain issues plaguing automakers. Expectations for when new vehicle production will return to pre-pandemic levels vary based on who you talk to.
From our sources, we expect that new vehicle production will return to pre-pandemic levels in the third or fourth quarter of 2022. The other question that is top of mind is, if automakers will produce as many vehicles as they did in the past?
We’ve heard from the chief executives at multiple automakers who have said they will not go back to stocking their dealerships will hundreds or thousands of cars. Instead, they will retain a business model where there is less supply because they’ve found it to be more profitable.
Does that mean used car prices will continue to appreciate? We don’t think so.
Automakers may stock their dealer lots with a lesser supply of inventory, however there will still be enough new vehicle supply to offset the craziness we are currently experiencing in the wholesale and retail used car market.
Our expectation is that used car prices will fluctuate and generally increase between now and the third quarter of 2022. At that point, we would not be surprised to see a consistent depreciation of used vehicles like we have seen in pre-pandemic times.
When should I sell my car to make the most money?
This begs the most important question of all … When should I sell (or trade-in) my car to make the most money?
Learn how to sell your car for the most money possible! Read: Car Trade in Tactics for Success
While we expect used car prices to continue to increase until the third quarter of 2022, we would not be surprised if we see a peak in prices in the spring of 2022. Spring is typically the season where used car prices are at their highest. While seasonality has not played a major role in used vehicle prices in 2021 (because of all the other factors), we still would not be surprised if used car prices peak during this time.
If you plan to sell or trade-in your vehicle we recommend tracking your vehicle’s valuation on an ongoing basis.
Dear Ray and Zach,
Thank you for continuing to give us all of the latest information as soon as it comes out. I am proud of being an early adopter of the CarEdge community. I have been telling my friends who rely on me for car advice, to wait if they can to purchase or lease a car. The example I use is a Honda C-RV that I helped a friend lease in October for $310 a month with $2000 out of pocket now goes for $425 with the same out of pocket. There are no incentives as evidenced by the lack of car commercials as we have all noticed this past year. They are all going for at the very least MSRP or a couple of hundred off! Thank you as always!
I regularly check the major car buying sites for what my car is worth. It definitely fluctuates. Vroom consistently offers me more than Carvana and Carmax. Today they offered 2 grand more than the others. That’s 28 hundred more than I paid for it a year ago. Not including tax and license. It’s a 2015 VW CC VR6 Executive. Paid 15 grand and Vroom offered 17800.