Prices for used cars have been going down steadily, but inventories are starting to lose their previous surplus as well. It’s standard procedure for car dealers to keep a 60-day supply of cars in stock so that shoppers have plenty to pick from. However, the average dealer had about 53 days of used cars to start March and they finished it with 44.
Car Sales Typically Rise in Spring
It’s common for car sales to rise during the spring as warmer weather moves in and people wait for tax refunds. That trend continued in 2024 with plenty of strong demand across the board. Used car sales increased in February and continued to increase until the last half of March when they peaked. The drop in used car prices has helped mitigate the high-interest rates.
Affordability is the single most important thing to car shoppers right now due to the high rates. As tax return season got underway, many shoppers had an influx of cash to use as a down payment, which drove many shoppers to look for cars during this period.
The good news is that the limited supply right now may not turn into a sharp price increase later in the year. Car dealers are aware of the spring surge every year and they plan accordingly. Lately, the wholesale price that dealers pay for used cars at auction has gone down.
Used Car Depreciation Floor in Effect
Despite the encouraging trends of prices going down, experts caution buyers that used car prices are likely to stay technically higher than in the past due to the lack of new cars built during the pandemic. To put it simply, there’s no used car factory. The used car market is dependent on the new car market.
During the pandemic, a huge number of new cars that would typically be built during a year were not. This removes a chunk of inventory that will take years to replace. Many drivers held onto their cars, including cars coming off leases, which resulted in fewer used cars on the market.
The floor on depreciation simply means that prices across the board aren’t going back to where they were pre-pandemic. The other problem is that buyers of new cars are largely preferring cars with cutting-edge features, and those cost more to add.
Why New Cars Cost More
As long as new cars continue to cost more, used cars will continue to cost more too. High labor costs and cutting-edge technology are keeping prices high. Consumers are leaning toward cars with touchscreens, parking sensors, and automatic climate control. Currently, a three-year-old used car is depreciating faster because they’re directly related to the recovering inventory of new cars.
However, used cars between five and seven years old are holding onto higher values from the pandemic thanks to low supply. With fewer older cars available on the market, the high demand keeps prices high.
Nevertheless, compared to the last few years, drivers who need to make a change in their ride have a better chance to do so this year in most cases.
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