Used car prices are expected to continue a gradual decline through 2024 and into 2025, but a sharp, dramatic crash is unlikely. The market is normalizing from the historic highs seen during the pandemic, driven by improved new car inventory and shifting economic pressures like higher interest rates. While prices are down from their peak, they are expected to settle at a new normal that is still higher than pre-2020 levels.
The primary driver for lower prices is the significant improvement in new vehicle inventory. During the chip shortage, limited new car supply forced buyers into the used market, causing prices to skyrocket. As automakers like Toyota and Ford ramp up production, more consumers are opting for new cars with attractive financing incentives, reducing demand for used vehicles. This rebalancing of supply and demand is the core reason for the price moderation.
Economic factors are also applying pressure. The Federal Reserve's interest rate hikes have made auto loans more expensive for everyone. This is particularly impactful for used car buyers, who often face higher APRs. As monthly payments become less affordable, some buyers are priced out of the market, cooling demand and forcing sellers to adjust prices.
The rate of decline isn't uniform across all vehicle types. The drop has been most pronounced for trucks and SUVs, which saw the largest price increases. In contrast, affordable, fuel-efficient sedans remain in relatively high demand, keeping their prices more stable. The following table illustrates average price trends based on recent industry data from sources like Mannheim and Cox Automotive:
| Vehicle Category | Peak Price (Late 2022) | Current Average Price (Mid-2024) | Projected Trend (End of 2024) |
|---|
| Full-Size Truck | ~$48,500 | ~$41,000 | Continued gradual decline |
| Midsize SUV | ~$34,000 | ~$29,500 | Slow decrease, high stability |
| Compact Sedan | ~$22,000 | ~$20,200 | Moderate decline, high demand |
| 3-Year-Old Luxury SUV | ~$52,000 | ~$45,000 | Faster depreciation |
| Hybrid Vehicle | ~$28,500 | ~$26,800 | Slower decline due to fuel costs |
For the best deal, timing matters. End-of-month, quarter, and year periods can be advantageous as dealerships aim to meet sales targets. The fall season, when new model-year vehicles arrive, also traditionally sees increased used car inventory. While waiting for a major price drop may be tempting, the gradual nature of the decline suggests that buying when you find the right vehicle at a fair price is a sound strategy.
