Q3 marked ‘return to normalcy’ for used-car retail prices
When it comes to used-car retail prices, the third quarter pointed to a “return to normalcy,” a trend that was particularly evident by this metric: late-model used cars have prices that are “notably below” those of new vehicles.
That’s according to the latest Used Vehicle Report from Edmunds, which detailed, among other trends, the move toward “stability” in the used-car market.
Edmunds indicates that there was a $13,686 gap during the third quarter between the average prices of used vehicles ages 3 years old or less and average prices on new cars.
As recently as the first quarter of 2022, that gap was just $8,950, Edmunds said.
What’s more, the gap between these prices during Q3 2019 (the last pre-pandemic year) was $13,194, Edmunds said.
“No trend marks the return to normalcy in the used car market more clearly than used pricing sitting properly below new values,” the company said.
Looking at the overall used-car market, average transaction prices were at $28,935 during Q3, which is a 5.5% year-over-year drop.
“The notable reduction in year-over-year prices can be attributed to supply improvements in the new-car business that have begun to trickle down to the used market,” Edmunds said.
“These improvements are material enough that, quarter to quarter, we saw a larger dip than usual: From Q2 to Q3 2023, there was a 1.8% drop in used vehicle prices compared to the typical 0.7% decrease observed from 2015-2019.”
It’s important to note that used-car prices remain well above where they were before the second quarter of 2021, which is where Edmunds’ data shows the ascent beginning for average prices.
The data shows that from the first quarter of 2018 through the first quarter of 2021, average used-car transaction prices were in the $20,000 to $25,000 range or below. Those numbers were well above $30,000 by the first quarter of 2022.
But Edmunds says there has been a “course correction” to the price volatility and market disruption that came from supply chain challenges during the early part of the pandemic.
“Q3 showed signs of a return to normalcy in the used car market, albeit at still-elevated prices,” Edmunds director of insights Ivan Drury said in a release. “Both dealers and consumers should benefit from the lessening of market turbulence as pricing and transacting can be handled with less risk that a vehicle’s value will move sharply in either direction over a short period — as was happening throughout the past few years.”