If you’ve been holding off on a used car purchase due to record high used car prices, December brings good news for buyers. So far, market declines have been largely confined to wholesale auctions. Will wholesale price drops finally translate to lower sticker prices? Let’s dive in and talk about why December 2023 is different.
Prices Falling Quickly At Wholesale Auctions
For much of 2023, there has been an unusually wide gap between auto auction price trends and the listing prices we’ve seen on dealer lots. However, with changes accelerating over the past month, it looks like retail used car prices are finally about to take a dive.
In November alone, used car prices were down -5.47% at wholesale auctions, according to Black Book weekly updates. The magnitude of this downward trend isn’t normal. In fact, prices are dropping at 5x to 6x the normal rate for some vehicle segments.
Retail days-to-turn, a metric indicating how long it takes for used cars to sell, has reached a 5-year high at 55 days. This statistic suggests that used cars are staying longer on dealership lots, giving buyers more options and potentially putting pressure on dealers to make sales.
The stage is set for a buyer’s market in the used car industry, offering consumers greater choice and increased bargaining power.
Segment-Specific Price Trends
Just how quickly are used car prices dropping? A closer look at the last month’s wholesale prices reveals shocking trends. The decline in used car prices is not uniform across all segments. Here’s how some of the most volatile used car segments fared in November:
Compact Vans: Down 13.98%
Full-size Trucks: Down 6.49%
Compact Cars: Down 6.98%
Full-size Luxury SUVs: Down 5.11%
Remember, these price drops occurred in only four weeks. Normally, price changes are measured in the tenths of a percentage point. These significant price changes indicate that certain vehicle categories are experiencing rapid depreciation. With negotiation know-how, car buyers have more leverage than at any other point in 2023.
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New Car Incentives Impacting the Used Car Market
The allure of new car incentives is pulling buyers away from used car lots. As more buyers opt for new cars, the used car market is experiencing increasing downward pressure on prices. This trend indicates that used car buyers are very likely to see better deals in December. However, a used car purchase may not make sense for everyone. Let’s talk about why.
At a time when the average used car loan rate is at 14% APR, shoppers are second guessing a used car purchase with good reason. But that doesn’t mean you must hold off on buying altogether. Consider this: the best new car offers feature low and even zero percent financing offers. Our CarEdge Coaches are recommending that all used car shoppers consider low APR new car deals before committing to high interest used car loans.
For more on how new car deals will impact used car prices, check out our deep dive.
Dealership Financing Challenges
Car dealers don’t typically own their lot inventory outright. They actually finance their inventory when they buy cars at the auction, and pay monthly ‘floorplanning costs’. With interest rates at 20-year highs, car dealers are feeling the pain like the rest of us. What does it all mean for used car buyers? Buyers should know that dealers are motivated to sell their inventory sooner rather than later, even if they try to act like they don’t need to. You certainly have negotiating power, especially in December of 2023.
Words of Wisdom from Ray Shefska, CarEdge Co-Founder
CarEdge’s Ray Shefska offers some valuable insights into the changing landscape of the used car market:
“We’re finally seeing a real correction in wholesale used car prices. My expectation is that we’ll soon see this translate to retail prices too. But even with stubbornly high dealership prices, you have MUCH more negotiating power today after a month of steep declines at the wholesale auctions that they buy cars from. Don’t hesitate to show the car salesperson that you’re aware of the recent used car price trends. Heck, print out the latest numbers if you have to. Not all car dealers will be willing to budge, but the smart ones will. You can always shop elsewhere.”
Expect Highly Negotiable Prices in December 2023
In conclusion, if you’re in the market for a used car, December 2023 may be the ideal time to make a purchase. High interest rates, increased inventory, slow used car sales, and enticing new car incentives have given used car dealers multiple reasons to lower their prices or at least display a willingness to negotiate. Interestingly, these same reasons are enticing more buyers to the new car market, especially with low APR offers featuring unmatched savings.
👉 If you’re in the market for a used car, bookmark this to stay on top of the latest: Used Car Price Trends (Updated Weekly)
Last month, the average used car selling price was $26,752. With what we’re seeing in today’s market, we wouldn’t be surprised if that figure is 10% less by the time we see the December data. December is the best time to buy a car in ages, for both new and used shoppers alike.
Here’s our car market forecast for 2024. We don’t expect the great deals to last into the new year!
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