The used-car market is pricier than pre-pandemic levels as inventories remain low, leading many analysts to predict prices could remain inflated until 2026.
Key Details
- Cox Automotive reports wholesale used-vehicle prices are up 8.8% this year through mid-March, according to the Manheim Used Vehicle Value Index.
- Used-vehicle inventory is down 21% from a year ago and down 26% from pre-pandemic levels of 2.8 million vehicles on the market in 2019.
- Analysts with Cox Automotive do not expect the total number of used sales to return to pre-pandemic levels of about 38.2 million units until at least 2026, with prices expected to continue to rise over the next few months.
Why it’s news
Three years after the pandemic, the used-car market is still feeling the effects of factory shutdowns as prices increase sector-wide with no anticipation of dropping soon.
In early 2020, many car manufacturing plants were shut down for months to stop the spread of Covid-19. The shutdowns eventually led to a significant used car shortage and other supply chain issues.
Once a car is sold and driven, it is considered a used car, but the lack of production meant fewer new vehicles would become used models for consumers to purchase. Demand for used cars during this time rose significantly, making the available cars more expensive, and the prices have not stopped growing.
“It looks like it will persist for some time,” says Cox’s senior industry insights manager Chris Frey. “It’s a function of this hole in new production, creating a dynamic where wholesale or general used values are higher because there are millions of fewer new vehicles that would eventually turn used.”
Cox Automotive reports wholesale used-vehicle prices are up by 8.8% this year through mid-March, according to the Manheim Used Vehicle Value Index. The index shows a record of 257.7 basis points set in January 2022 which dropped to 217.66 in November 2022 before shooting back up again this month to 238.6.
Along with used-vehicle numbers being down, more people are opting to buy out their current lease instead of trading in for another car, which adds to the vehicle shortage. Cox reports a 20% increase in consumers who leased their vehicles by buying them out instead of trading them in from 2019 to 2022.
Analysts report that used car prices will most likely not see pre-pandemic levels until around 2026, as vehicle manufacturers attempt to rebuild inventory and make more vehicles available to consumers.
It will take a while for manufacturers to meet the current demand and create a surplus to have an abundance of cars ready, which many think will not be for at least another three years.
