Our top selections
Top Picks
Tips and Guides
Guides
Calculators
Tools
My NerdWallet
Used Car Prices are Dropping: What That Means for Car Buyers
Advertiser disclosure You’re our first priority. Every time. We believe that everyone should be able to make sound financial decisions without hesitation. While our website does not include every company or financial product that is available on the market, we’re proud that the advice we provide and the information we offer as well as the tools we design are objective, independent easy to use and completely free. So how do we make money? Our partners compensate us. This may influence which products we write about (and the way they appear on the site) however it in no way affects our advice or suggestions that are based on thousands of hours of research. Our partners are not able to be paid to ensure positive ratings of their goods or services. .
Used Car Prices are dropping What Does This Mean for Car Buyers
Used-car prices took a big drop in December, but purchasing a vehicle now could still be expensive for certain buyers.
by Whitney Vandiver Writer | Car ownership, car maintenance Whitney Vandiver writes for NerdWallet on ways that car owners can reduce the cost of ownership and maintenance. She has previously written for the petroleum and gas industries, which led to her being published in national journals as well as international magazines. Whitney started writing because of love and finds stories that showcase or assist the LGBTQ+ community the most satisfying to write. If she’s not working, she’s walking, reading, and walking her Irish Wolfhound. Her home is in Houston.
Feb 1 2023
Written by Julie Myhre-Nunes,, Assistant Assigning Editor Auto loans, consumer credit Julie Myhre-Nunes works as an assistant editor assigned to NerdWallet. She has been working in the area of personal finance for more than 10 years. Before being hired by NerdWallet, Julie oversaw editorial teams at NextAdvisor, Red Ventures and Quote.com. Julie’s personal financial insights have been highlighted in Forbes, The Boston Globe and CNBC over the years. Julie’s writings have been featured through USA Today, Business Insider and Wired Insights, among others. Email: .
The majority or all of the items featured on this page are provided by our partners who pay us. This influences which products we feature as well as the place and way the product appears on the page. However, this does not influence our opinions. Our opinions are our own. Here’s a list of and .
Following more than one year of overheated prices, the used-car market cooled by a few degrees in December.
The new trend offers some relief for car buyers. However, inventories aren’t yet get to levels pre-pandemic and consumers still miss the purchasing power they enjoyed in 2019.
While experts say this year’s used-car market will improve the consumers must have realistic expectations of what buying a car will look like in 2023.
December saw a record drop in used-car prices
According to a report from January 2023 from CoPilot, a personalized app for buying a used car, used car prices dropped to a record low in the month of December. It was the sixth consecutive month, dropping 8.8% since January 2022. To put it in perspective, this plunge was the largest annual drop the used car market has experienced since the final month during the Great Recession in June 2009.
But they’ve left a long way to go before they’re in familiar territory — the median used-car cost was 30.1 percent higher than a normal market price.
Markets are seeing “more of a gradual recovery than one would normally consider a decline,” says Joseph Yoon, consumer insights analyst at Edmunds, an online guide to cars. “The prices are very high, extremely, and very higher.”
Interest rates still hamper used-car access to affordable financing
One of the factors that affect used car prices is the Federal Reserve’s abrasive rate of interest hikes in response to the rising rate of inflation.
According to Edmunds, the average interest rate for a used-car loan grew from 8.76 percent in July to 10.25% in December. As loan rates rise those who finance car purchases will pay more car, even with lower prices on the sticker.
What does this mean for car buyers
Consumers planning to buy an used vehicle this year may be pleased to see lower windshield prices but will still find they must navigate a crowded car market. Prospective buyers need to anticipate certain trends when they shop for a used vehicle this year.
Cheaper prices compared to 2022
As the demand for cars used wanes, prices should continue to drop. According to J.P. Morgan Research, prices for used vehicles could fall as much as 10 20 to 20% by 2023. Should the Fed continues to increase rates of interest, the cost of vehicles will likely keep their downward trend.
However, not all models will drop in price at the same time. Smaller cars and pick-ups have seen the least changes in price from January 2022 according to Cox Automotive, an auto company that collects data — while high-end vehicles and SUVs have experienced the biggest price decreases.
In the event of a continuation of an ownership cost higher than normal
With the price of used cars dropping, tempting potential buyers, the surge in interest rates will mean consumers who need to finance their purchases will likely continue to feel the pressures of the inflated market.
Car buyers who take advantage of falling prices and make finance purchases in the midst of higher interest rates might pay more for cars for the duration of the loan. In addition to a greater monthly installment, they may have negative equity at the end of the tunnel when they find themselves .
Variable trade-in value fluctuations
Based on J.D. Power which is a firm that conducts research and data that tracked trade-ins in December, vehicles were able to receive an average of $786 less in trade-in value than those traded last June. Since dealerships are expected to earn less from used car sales the value of trade-ins will continue to decrease in comparison to the prior year.
People who plan to trade in their current cars should be prepared for lower prices than the ones offered in the past year.
“It’s likely to result in a substantial drop of what you’ll get from the trade-in price compared to the price if you were searching for an auto in September,” claims Terrance Gandy as the manager of used car sales for Route 44 Toyota in Raynham, Massachusetts.
Increased but relatively low inventory levels
Automakers are working towards pre-pandemic production levels and used vehicles are getting more affordable, the consumer demand is still expected to be high following the shortage of vehicles in years past, according to J.D. Power. This will reduce the inventory of used cars because more people are choosing to purchase vehicles after waiting to see the prices of used cars which reached their highest in September.
“Even even if prices come lower,” says Yoon, “for the next few years we’ll still be millions of cars short of used car inventory.”
But that will help certain consumers have a better chance when it comes to bargaining offers for trade-ins.
“They have a greater chance of negotiating right now because dealers have to take these automobiles off their showrooms,” says Gandy. “The ball is kind of in your hands if are able to trade in your car since these dealers need your car.”
About the author: Whitney Vandiver is a writer at NerdWallet currently focusing on the maintenance of vehicles and car ownership. She has previously written about payments for small businesses and payment.
Similar to…
You can even go deeper into Auto Loans
Learn more about smart money strategies delivered straight to your inbox
Sign up and we’ll send you Nerdy content on the topics in finance which matter to you the most as well as other strategies to help you get more from your money.
Take all the appropriate money moves
Credit Cards for Banking Financial Planning News Financial News Insurance Investing Loans Mortgages Small Business Taxes Travel
About
help
Legal
Download the application
Disclaimer: NerdWallet strives to keep its information current. This information may be different than what you find when you visit a bank, service provider or the website of a specific product. All items in the financial market, such as shopping products and services are presented without warranty. If you are considering a purchase, read the terms and Conditions. Pre-qualified offers aren’t binding. If you notice discrepancies on your credit score, or any other information from your credit reports or credit report, you should get in touch with TransUnion(r) direct. NerdWallet Compare, Inc. NMLS ID# 1617539 California: California Finance Lender loans are arranged in accordance with Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812. Property and Casualty insurance services provided by NerdWallet Insurance Services, Inc. (CA resident license number. OK92033) NerdWallet(tm) | 55 Hawthorne St. – 11th Floor, San Francisco, CA 94105
NerdWallet USA
|
|
|
|
(c) (c) 2023 NerdWallet, Inc. All Rights Reserved.
If you liked this information and you would such as to get even more details regarding $255 Payday Loans Online Same Day (sbankaf.site) kindly see the web site.