Used-Car Prices Fall

As the economy continues to teeter toward a recession, used-car prices continue to fall. Pricing has gone down almost 5% from September and nearly 9% from a year ago, according to a report from iSeeCars. The Tesla Model 3 had the biggest price drop in six months, down more than 21% since September. 

Some of the used-car price declines are resulting from an influx of new cars on many dealers’ lots. But analysts say prices may turn around in part because of spring’s onset, a traditionally strong time for car buying due partly to income tax refunds. 

“The used-car market has fragmented over the past year,” iSeeCars executive analyst Karl Brauer says. “While prices are still higher than before the pandemic, they have consistently dropped over the past year and at an accelerated rate in the past six months.” 

He says dealers should carefully consider models and pricing, especially before buying at auction. Other analysts advise dealers to lean heavily on data about consumer preferences in their markets and look for alternate sourcing of used cars.

Brian Moody, executive editor of AutoTrader, points out that the majority of vehicles with price decreases are battery-electric vehicles and hybrids.

iSeeCars Top 10 Six Month Price Drops_0

“The weird thing about electric cars is, electric cars aren’t really a segment,” he tells Wards. “They are a novelty, and they only make up 5% or 6% of the market. Because you have such a small market segment, you can see a more direct relationship between them.” 

Moody adds many of the cars on the list are high-priced, and consumers generally are looking for low-priced used cars due in large part to economic uncertainty. 

“I’ve been hearing from dealers that it is getting harder and harder to source quality used vehicles at a price point consumers are looking for,” he says. “And I think that’s really going to be somewhat difficult right now.” 

Kevin Roberts, director of industry insights & analytics for CarGurus, says the iSeeCars analysis of used-car pricing aligns with his findings. He notes that prices will ebb and flow as the market recovers from the chip shortage and retail downturn caused by the pandemic. The current economic uncertainty is bound to add to the volatility. He adds some prices may recover depending on fuel supplies. 

“We saw rapid price increases (for BEVs and hybrids) when gas prices were going up in the spring of last year,” Roberts tells Wards. “It was kind of similar to what we saw in 2008 when gas prices went up, and everyone wanted a Toyota Prius. 

“The price points of Teslas are much more in the luxury range. That’s going to be a limited range of buyers. But as you start to see more of the EVs move into $30,000 price range, I think that’s going to be a pretty attractive price point for consumers.” 

Zack Krelle, industry analyst for TrueCar, agrees consumers’ search for affordable options includes their need for shorter loans, especially as interest rates for used vehicles approach 11%. 

“While we are expecting a slight increase in retail prices to materialize this month, the longer-term trend has been down (about 10% lower YoY). The decreases have not been entirely uniform, with some pockets holding their value more than others,” he tells Wards.

“Surprisingly, many late-model vehicles are seeing the largest percentage decreases in pricing from a year ago. These models command plenty of attention due to high new-vehicle prices, yet they carried the weight of elevated pricing when they were new.”