Have Used-Car Prices Peaked?
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Here's your money briefing for Tuesday, May 17th. I'm J.R. Whalen for The Wall Street Journal. Prices for both new and used cars have risen sharply during the pandemic. That sticker shock, combined with fewer options, has given shoppers fits. But there's a glimmer of hope for anyone looking for a pre-owned vehicle. Used car prices may have hit a breaking point.
The dealers I spoke to, what they're seeing is that some buyers are choosing to sit on the sidelines and wait for prices to come down more.
On today's show, we'll talk with our autos reporter, Ryan Felton, about whether prices for used cars have peaked and what it means for anyone in the market for a used or new car. That's after the break.
Over the past year, prices for pre-owned cars have jumped along with pretty much everything else. But that used car sticker shock has gotten a little less shocking lately. Prices are actually coming down. So what does that mean for car buyers? Wall Street Journal Autos reporter Ryan Felton joins us to discuss. Hey, Ryan, thanks so much for being here.
Thanks for having me.
So Ryan, we've talked on the show before about how frustrating it's been for car buyers, you know, whether they're looking for something new or pre-owned and dealing with record high prices and tight supply. But let's focus on used cars. Prices have been a big contributor to inflation over the past year.
Have used-car prices finally stopped rising after pandemic spikes?
How much have they actually risen and what's pushed them higher?
So during the pandemic, prices for pre-owned vehicles jumped about 45%, hitting an average of $29,969 at the end of last year. And that was at a much, much faster clip than what was going on for new vehicles. And that's according to the data research firm Edmunds. It's due to many things. There's the shortage of new vehicles that everyone knows about. And that sort of has created this cascading effect of really just bad things for prices by pushing buyers into the used market at a faster clip. And that has basically just put this large group of people competing for a really smaller number of cars.
Yeah, and those scenarios you mentioned, you know, would send people, you think, to the used car lot and would lift demand. So why have used car prices started coming down?
I think, you know, one thing to kind of, I would stress is coming down is relative. You know, we're talking about coming down from a high of nearly 30,000. And as all the analysts I've spoken to, you're not going to see a decrease as fast as we saw an increase over the last year. So it's somewhat more of like a leveling off. And part of that is being driven, at least according to some used car retailers, because of just how high the prices have become. Some major used car retailers like CarMax, another America's car mart, have cited affordability as being a driving factor, at least in part, for slowing demand. The dealers I spoke to, what they're seeing is that some buyers are choosing to sit on the sidelines and wait for prices to come down more.
And that's due in part because prices on just about everything else are rising. And so I think there's a lot of consumers who are just feeling squeezed. Now, how much of a decline in used car prices are we actually talking about? In April, the average price of a used car was $29,948, according to Edmunds. And that's about $21 less than the high in December. That's it? $21? Yeah. Not so much relief, but not the sharp, never-ending increase that we saw last year.
Okay. So used car prices on average have come down, though not by a lot.
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