Last Updated on February 3, 2023
Curious when used car prices will start dropping? You’re not alone. Many car shoppers are wondering when will used car prices drop, and make buying a used car more affordable again. While no one can say for certain, there are some factors that could lead to a decrease in prices in the near future.
Used car prices are expected to drop in price beginning in the forth quarter of 2022, and continue to decline in price by as much as 15% by the end of 2023. Because of higher demand and limited supply, prices are not expected to drop to pre-pandemic prices.
With the chip shortage and supply chain woes beginning to ease (slightly), new cars will again roll onto dealership lots at a more consistent basis. An increase in new car inventory will certainly help drive down the cost of used cars.
So, should you wait to buy a used car until prices fall? That’s a tough question to answer. On one hand, you don’t want to overpay for a car. But on the other hand, waiting too long could mean you miss out on your perfect car.
Another factor to consider – car trade-ins are worth more than ever. Now might just be the perfect time to get rid of an old clunker.
It really depends on your personal circumstances. If you’re in no rush to get a car, our recommendation is to wait for prices to drop further.
However, if you need a car ASAP, then you might have to pay a little bit more.
There’s no right or wrong answer here. Just weigh your options and make the decision that makes the most sense for you.
The good news is, used car prices are expected to decline in the next few months and throughout 2023.
Let’s discuss the factors that are leading the price decline. This way you can make the decision to buy now, or wait.
Why Did Used Car Prices go up in the First Place?
It all started when the global economy took a hit in 2020. Major production and export centers went into lock downs due to the pandemic. Workers were sent home, factories were ordered shut, and production of vital automotive components came to a screeching halt.
And as more employers began to let their workforce work remotely, car dealers decided to pull back on ordering new vehicles.
Rightfully so since dealerships feared being stuck with too much inventory they won’t be able to sell.
However, in an effort to spur sales of new vehicles, auto manufacturers offered aggressive car deals. And I mean AGGRESSIVE.
Deals such as zero percent financing for up to 84 months, payment deferrals and a handful of other incentives. Consumers wisely jumped at the opportunity to take advantage of these deals.
After roughly a year of high demand and the lack of new inventory, dealerships ran out of new cars to sell.
And with chip manufacturing continuing to suffer from a raw materials shortage, the ability to source semiconductors for new vehicle orders became impossible.
In the wake of the chip shortage, media outlets began reporting that vehicles had been parked outside of assemble plants. Just waiting on semiconductors to be finished.
Consumers then turned their attention to the used car market. This shocked the pre-owned market – sending prices up as much as 42% according to the U.S. Bureau of Labor Statistics.
When Will Used Car Prices Drop Depends on Several Factors
There are several factors that will affect when used car prices drop. The economy is a big one. If there’s a recession, people will be less likely to buy used cars, and dealers will be more likely to lower prices to try to sell them.
Another factor is gas prices. If gas prices are high, people will be less likely to buy new cars and may turn to used cars instead.
And because interest rates play a big role in car loan payments, they affect whether people buy new or used cars.
When rates are high, demand for used cars goes up because people are trying to save money. When rates are low, demand for used cars goes down – because people can afford higher monthly payments on new cars.
Another factor that plays an important role is the options you want in a vehicle. Because of the chip shortage, many new cars are being shipped with less features.
As you can see, it really depends on a number of different factors affecting used car prices.
How Much Will the Price of a Used Car Drop?
According to Ally Financial, the price of used cars is predicted to decrease by 15% over the next two years. In fact, we are already seeing prices of used cars fall by an average of 4% in just August alone.
However, don’t expect them to go back to pre-pandemic prices just yet…if ever.
Should I Wait to Buy a Used Car?
It’s a tough question, and there’s no easy answer. There are pros and cons to buying a used car now, or waiting to see how much they fall in price.
With reports of used car pricing falling by as much as 4% in August, it may be worth waiting a few more months before making that purchase.
It’s hard to say exactly when prices will bottom out. So it might be best to wait and see what happens.
However, if you find a car that you really want – don’t wait too long. Because the price drop may not be as big as you think.
Ultimately, it’s up to you whether or not to wait for lower prices on used cars. Weigh the pros and cons and make the decision that’s best for you.