Used Car Prices Drop Faster Than Expected, Now 21% Below 2021 Peak

However, they’re still around 33 percent higher than they were before the pandemic at the end of 2019

The wholesale value of secondhand vehicles was down 7.0 percent at the end of 2023, which was a sharper decrease than analysts predicted. That means that used vehicle prices are down nearly 21 percent, as compared to their pandemic peak in December 2021.

The final two weeks of 2023, in particular, saw above-average declines in the three-year-old used vehicle market, and over the course of December, average prices dropped by 1.4 percent. By comparison, before the pandemic (2014-2019), prices normally fell by just 0.5 percent in the final four weeks of the year.

The price drops were precipitated by falling prices in nearly every segment. For instance, values were down by 6.9 percent in the luxury segment, 6.5 percent in the pickup segment, and 6.1 percent in the SUV segment. However, the biggest losers were the compact car segment (-11.7 percent), the midsize car segment (-8.1 percent) and vans (-7.9 percent).

Read: These Are The Best Selling Used Cars, Trucks And EVs Of 2023

Those price drops are apparently attracting consumers, though. In the last month of the year, the average daily sales conversion rate increased to 53.8. Cox Automotive reports that the average sales conversion rate in December 2019 was 52.2 percent, suggesting that demand is improving.

Indeed, estimates suggest that December sales were up 1 percent as compared to December 2022, and 3 percent as compared to November 2023. Meanwhile, they suggest that vehicles are spending one day less on the lot than they were in 2022.

However, despite the strong sales, the good news for consumers is that Cox Automotive anticipates that the used vehicle market will continue to depreciate a bit faster than it historically has due to the price bubble caused by the pandemic. Unfortunately, the rate of inflation won’t bring us back to pre-pandemic prices, according to Jeremy Robb, senior director of economic and industry insights at Cox Automotive.

“As we move into 2024, it’s important to note that used-vehicle values increased faster than the overall rate of inflation,” said Robb. “So, even though prices have come down over the last two years, they are still about 33% higher than at the end of 2019. More normal declines will likely be seen in the coming years, but the average value of a wholesale unit will continue to be higher than in the past.”