Anyone hoping that the used vehicle market will become more predictable or even right-size itself in 2023 will likely be disappointed. Unique market conditions and a slew of new challenges are reshaping the used market in unexpected ways.
After experiencing a meteoric rise in value, used vehicle prices have slightly inched back toward Earth with the return of price drops and seasonal depreciation but remain significantly higher than they were pre-pandemic.
Given the price ascension of new vehicles, used ones still provide value to consumers seeking an affordable mode of transportation. That said, the main sources of used vehicle inventory (lease returns, trade-ins and daily rentals) are still constrained, meaning the used vehicle market is expected to remain competitive with the tandem of reduced volume and high demand keeping prices elevated.
Price relief for shoppers could arrive if and when automakers reignite incentives on new vehicles, but for now, discounting remains limited. And with the fragility of today’s pesky supply chains, any discounting out there may not make a significant impact in the near term.
Edmunds analysts crunched the numbers and unearthed four major trends in a new Q1 2023 Used Vehicle Report published today. Here are the major takeaways:
Trend #1: Used car prices are softening but remain historically high. The average used vehicle transaction price in Q1 2023 dipped 6.4% year-over-year but is up 44% from five years ago.