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Used Car Prices are Dropping: What That Means for Car Buyers

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Used Car Prices are Dropping: What That Means for Car Buyers
The prices of used cars saw a huge fall in December, however buying a car today could still be prohibitive for some buyers.
Written by Whitney Vandiver Writer | Car ownership, maintenance of cars Whitney Vandiver writes for NerdWallet on ways that car owners can save money on ownership as well as maintenance. She has previously written for the petroleum and gas industries, which led to her being recognized in national newspapers and international magazines. Whitney became a writer out of love and finds stories that highlight or help the LGBTQ+ community the most satisfying to create. When she’s not writing, she enjoys walking and reading with her Irish wolfhound. She is based in Houston.

Feb 1st 2023

Edited by Julie Myhre-Nunes Auto loans, consumer credit Julie Myhre-Nunes works as an assistant editor assigned to NerdWallet. She has worked in the field of personal finance for more than 10 years. Prior to becoming a part of NerdWallet, Julie oversaw editorial teams at NextAdvisor, Red Ventures and Quote.com. Her personal finance insight has been featured on Forbes, The Boston Globe and CNBC through the years. Julie’s writing has been published through USA Today, Business Insider and Wired Insights, among others. Email: .

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After more than a decade of soaring prices The used-car market began to cool by a few degrees in December.
The trend brings some relief for car buyers. However, inventories aren’t yet be at levels that are comparable to pre-pandemic, and consumers are still unable to enjoy the buying power they had in the year 2019.
While experts say the used car market for this year will continue to improve the consumers must have realistic expectations of what buying a car will look like in 2023.
December saw a record decline in used car prices
According to a January 2023 report from CoPilot an app that is personalized for car buying, used-car prices decreased to a record low in the month of December. It was the sixth time in a row month, with a drop of 8.8 percent from January 2022. For a better understanding this drop was the largest annual drop the used-car segment has seen since the end in the Great Recession in June 2009.
However, they’ve left a long way to go before buyers are within the same territory as they are today — the median used-car price was 30.1 percent more than the market average.
It’s a market that’s witnessing “more of a slow return to normalcy than what is typically an economic decline,” says Joseph Yoon the consumer insights analyst at Edmunds an online car guide. “The prices are very highly, extremely elevated.”
Interest rates still hamper used-car access to affordable financing
One factor that has influenced the prices of used cars is the Federal Reserve’s aggressive rate of interest hikes in response to the rising rate of inflation.
According to Edmunds, the average cost of a used-car loan increased from 8.76 percent in July to 10.25% in December. As loan rates become more expensive those who finance car purchases will be paying more car, even with lower prices on the sticker.
What does this mean for car buyers
People who are planning to purchase an used vehicle this year might be relieved to find lower prices on windshields but will still find they need to navigate an overcrowded car market. Buyers of used cars should be aware of various trends when looking for a used vehicle this year.
Lower prices than 2022
If the demand for used cars wanes, prices should be expected to continue to fall. As per J.P. Morgan Research, the cost of used cars could fall as much as 10% to 20% in 2023. If you believe that the Fed continues to increase rates of interest, the cost of vehicles will likely continue to fall in a downward trend.
However, not all models will be priced at the same time. Smaller cars and pick-ups have seen the least changes in prices since January 2022, in the opinion of Cox Automotive, an auto data company — while the luxury cars and SUVs have seen the biggest price decreases.
The continuation of a cost that is higher than normal
When used car prices fall and attract potential buyers, the increase in interest rates means that consumers who have to finance their purchases are likely to feel the pressures of the inflated market.
Car buyers who profit of falling prices and make finance purchases in the midst of higher interest rates might pay more for a car for the duration of the loan. In addition to a greater monthly cost, they could have negative equity at the end of the tunnel and end up .
Values for trade-ins fluctuate
As per J.D. Power, a research and data firm, trade-in vehicles in December received the equivalent of $786 more in value for trade-ins than the vehicles that were traded in June. As dealerships expect to earn less from used car sales and trade-in value will continue to decrease in comparison to the prior year.
Car owners looking to trade in their current models should anticipate lower prices than the ones offered in the past year.
“It’s likely to result in a significant reduction of what you’re gonna get from the value of your trade-in if you were looking for a car at the end of September” says Terrance Gandy, the used-car sales manager in Route 44 Toyota in Raynham, Massachusetts.
Inventory levels have increased, but remain relatively low. levels
As automakers work towards the production levels of pre-pandemics and used cars are becoming more affordable, consumers’ need for cars is expected to be high due to the vehicle shortage of years past, according to J.D. Power. This will reduce the vehicles for sale as more car buyers decide to purchase cars after waiting to see the prices of used cars which reached their highest in September.
“Even even if prices come lower,” says Yoon, “for the foreseeable future we’ll still be millions of vehicles short on used car inventory.”
This will allow certain consumers to be in a stronger position when it comes to bargaining offers for trade-ins.
“They have a greater likelihood of negotiating now since dealers need to remove these new automobiles off their showrooms,” says Gandy. “The ball is in your hands if do decide to trade-in your vehicle because dealers want your vehicle.”

About the writer: Whitney Vandiver is a writer at NerdWallet currently focusing on the maintenance of vehicles and car ownership. She’s written previously about small-scale businesses and payments.

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