Used-car prices may be starting to soften, research suggests.
After surging through the pandemic by as much as 50%, prices in the used-car market showed some easing in the last three weeks of January, according to car-shopping app CoPilot, which tracks daily prices at dealerships across the country.
“For just about every age bracket and segment, prices reached all-time highs in late 2021, and have started to level off or soften over the past month — a potential signaling of relief on the horizon for consumers in the car-buying market,” said Pat Ryan, founder and CEO of CoPilot.
For cars that are 1 to 3 years old — a category that has driven much of the price jump — the average cost is $41,121, down 2.1% from about $42,000 in early January, according to CoPilot. The price of 2019 models have slid by 2.5%, while 2020 vehicles are down 4.4%.
At the same time, dealer inventories have risen 15% for 2019 cars and 22% for 2020 models, CoPilot said.
“Given mounting pressures on 2019 and 2020 models, we are likely to see those vehicles lead the pack on the long road back to normal,” Ryan said.
As the auto industry continues dealing with a shortage of computer chips needed to manufacture today’s vehicles, new car inventory has fallen short of demand throughout the pandemic and spilled into the used-car market. (The average transaction price of a new car is $46,832, CoPilot data shows. The amount is relatively unchanged from early January.)
Even with the current softening in the used-car market, average prices remain elevated. The $41,121 average for 1- to 3-year-old cars as of Jan. 30 is up more than 50% from $27,301 in January 2020 (pre-pandemic), according to CoPilot.
Older used cars (4 to 7 years old) average $31,046, up almost 50% from $20,757 before the pandemic.
For consumers, higher prices for used cars have generally meant getting more on a trade-in: The average reached $9,852 in January, an 88% increase of $4,611 from a year ago, according to a joint estimate from J.D. Power and LMC Automotive.
Demand for cars is expected to remain elevated this year, with 4.5 million to 5 million consumers waiting on the sidelines to make a purchase.
“This pent-up demand will keep inventories low and prices high throughout most of 2022,” Tyson Jominy, head of data and analytics for J.D. Power, told CNBC in January.