Used cars are expensive primarily due to a persistent imbalance between high consumer demand and critically low supply. This situation was created by a perfect storm of factors: the global microchip shortage that slammed the brakes on new car production, leading more buyers to the used market, and economic pressures like inflation and higher interest rates that make new vehicles less affordable. The result is a market where used car values have remained elevated far beyond traditional depreciation curves.
The core of the issue is the microchip shortage. Starting in 2020, this crisis forced automakers to drastically cut new vehicle production. With fewer new cars on dealer lots, buyers who would typically purchase new turned to the late-model used market instead. This surge in demand for a finite number of used vehicles caused prices to skyrocket. Even as chip supplies improve, it will take time for new car production to fully recover and ease pressure on the used market.
Adding to the problem are broader economic factors. High inflation has increased the cost of everything from raw materials to logistics, which impacts the price of used vehicles. Furthermore, the Federal Reserve's interest rate hikes have made auto loans more expensive. For many, a monthly payment on a new car with a high interest rate is now out of reach, making a used car—even at an inflated price—the more viable option.
Supply chain disruptions also affected the number of used cars available. During the peak of the pandemic, rental car companies sold off large portions of their fleets to stay afloat, removing a major source of late-model used vehicles from the pipeline. A reduction in leasing also meant fewer near-new cars are returning to the market now. Simply put, there aren't enough used cars to meet the strong demand.
The table below illustrates the dramatic price shift for popular used vehicles, comparing average list prices from a pre-pandemic baseline to the current market.
| Vehicle Model (3-year-old) | Pre-Pandemic Price (2019) | Current Market Price (2024) | Percentage Increase |
|---|
| Honda CR-V EX | $22,500 | $28,900 | 28.4% |
| Toyota RAV4 XLE | $23,100 | $29,500 | 27.7% |
| Ford F-150 XLT | $31,800 | $40,200 | 26.4% |
| Chevrolet Silverado 1500 LT | $30,500 | $38,800 | 27.2% |
| Toyota Camry SE | $18,900 | $23,600 | 24.9% |
| Honda Civic EX | $17,800 | $22,400 | 25.8% |
While the market has cooled from its peak, a return to pre-pandemic pricing is unlikely in the near term. The structural issues in the supply chain and shifting consumer purchasing habits have created a new normal for used car values.
