Just about everything about the COVID-19 pandemic has been unpredictable, including car sales. During the onset of the pandemic, used car sales tanked dramatically. Some shoppers held off due to the uncertainty about the future, but a bigger factor was that customers simply couldn't visit the dealership. As stay-at-home orders lifted, this trend took a sharp turn. Used car sales bounced back nearly as fast as they sank, causing a shortage of available cars and a subsequent rise in prices. Interesting, not all vehicles and regions were impacted equally. See the latest used car price trends and what you can expect in the coming months.
Used Car Sales Climb, So Do Prices
When COVID-19 started, car sales took a nosedive to levels last seen in 2014. As restrictions lifted and dealerships reopened, however, used car sales boomeranged back to levels above those seen in 2019. According to CNET, by the end of 2020, used car prices were up nearly 10% compared to the same time in 2019 which correlates to an average price increase of $2,193.
The reasons for this rollercoaster are numerous. First, automakers shut down their factories and fell behind on production. As a result, there was a shortage of new cars available that led shoppers to buy used instead. Pent up demand is another contributing factor since dealerships were forced to close and customers couldn't come in to test-drive vehicles. Finally, public transportation became an unpopular option during the pandemic, motivating shoppers to purchase a vehicle. As demand grew amid the dwindling supply of used cars, prices climbed and dealers were less likely to negotiate.
Price By Segment and Region
Not all vehicle segments saw the same level of price increases. According to a study by CoPilot, you'll find significant price variations depending on the type of vehicle you're in the market for. Used trucks, coupes, and convertibles saw some of the highest price increases, while passenger vans saw a price dip of 4% as demand for shared vehicles shrank during the pandemic. Due to growing popularity and demand, truck prices have seen the largest increase, at more than 12%, followed by coupes (9.4%), cargo vans (8.4%), and convertibles (7%).
How much of an impact will the price hikes really have on car buyers' wallets? CNET reports that a used Ram 1500 went for an average cost of $32,841 which is an increase of $5,911 from this time last year. A used Ford Mustang convertible costs $25,435 on average today which is up from $3,997 from last year.
CoPilot's study also identified the U.S. cities with the largest used car price increases between June and December of 2020. Salt Lake City, Utah leads with a 7.37% average used car price change and a staggering 19.0% increase for the Ram 1500. Next is Orlando, with an average used car price change of 7.36% and a 23.4% increase for the Ram 2500. The third-largest average used car price increase was seen in Nashville with a 28.5% increase in the price of a Ram 1500.
What Does the Future Hold?
Data shows there is both good news and bad news for used car buyers. The bad news is that it is still a seller's market as used vehicle prices continue creeping up, but the good news is that shoppers who have a trade-in will get more money for their vehicles.
Automotive News reports that used vehicle prices increased 1.23% in January of 2021 compared to December of 2020 and it is likely that the trend will continue through the spring. Although the supply of vehicles is stabilizing, it is still not back to pre-pandemic levels. According to Bill Sepic, CEO and President of the Wisconsin Auto and Truck Dealers Association, demand will continue to grow due to shoppers looking to use their new stimulus checks to buy a car. Additionally, many people have saved money over the course of the pandemic that they can put towards a car purchase. Lastly, tax return season is fast approaching.
The good news? If you're looking to buy a used vehicle, and your current car is in good condition, now is the time to take advantage of generous trade-in offers. Dealers will be more willing to offer a favorable trade-in amount for your vehicle compared to pre-pandemic times due to the decreased inventory. Putting the trade-in towards the down payment of the new vehicle can off-set the price increase.