If you're shopping for a used car, the options keep getting better and the prices keep going lower.
According to the latest data from car shopping website Edmunds.com, the used car market is hot, with average prices paid for used vehicles in the second quarter nearly 7% lower compared with prices in the same quarter a year ago.
Yet the average time to sell used vehicles — the number of days a vehicle sits on a dealership lot before being sold — was 35, compared with 34 days a year earlier. In short, car dealers are selling used cars just as fast as they did a year ago, but consumers are paying less.
“You’re seeing real life, true economics happening right before your eyes. I always joke with people, 'If you never understood that Econ 101 class, all you have to do is go buy a car,' ” said Ivan Drury, director of insights at Edmunds.com.
Indeed, the supply of used cars is finally rising to meet demands of a broader range of consumers, bringing prices down. It is happening because inventory of new cars has improved, pushing down prices there, too, and adding more trade-in cars to the used inventory.
"The used car market prices are trending downward in a very predictable manner," Drury said. "These vehicles aren’t sitting on the lot for dramatic periods of time. Every time the vehicles go down in price, there are consumers there ready to buy.”
But one trend Drury said no one saw coming was that prices for used electric vehicles would continue to plummet for two years in a row now.
"If you want the cheapest transportation, the heaviest discounted vehicle in the used market, an EV is going to show up on your search," Drury said.
He cited a 2021 Tesla Model Y as an example. It sold new for $69,570 two years ago; in May it was available for $31,064 with about 42,000 miles on it. Similarly, Drury said, a 2021 Toyota RAV 4 Hybrid sold for $41,298 two years ago and in May was selling for $30,006 with 39,000 miles on it.
Average prices for used vehicles driven by new vehicles
Here is how the average transaction prices break down for the second quarter compared with a year before:
- Used vehicle: $27,319 in Q2 2024 compared with $29,382 in Q2 2023 — 6.8% decline.
- Used Electric Vehicle: $33,787 in Q2 2024 compared with $42,482 in Q2 2023 — 20.8% decline.
- Used Hybrid and Plug-in Hybrid EV: $30,416 in Q2 2024 compared with $32,038 in Q2 2023 — 5.1% decline.
These pricing trends in the used market reflect what has been happening on the new car side as inventory has improved. Drury said the average transaction price for a new car in the second quarter was $47,424 compared with the year-ago price of $47,866. The minor decline in new pricing isn't as noticeable as it is in used vehicles because some of the discounting on new vehicles comes from carmakers offering low finance deals or longer-term loans, which isn't reflected in the transaction price.
In fact, in the second quarter, the average discount for new vehicles climbed to $1,687 compared with $611 in the same period a year ago. The average days to turn new vehicles off of dealer lots increased to 53 compared with 37 a year ago. That means a buildup of new vehicles on lots over the past year has pushed carmakers to offer discounts and incentives to move aging new car inventory. As a result, the values of newer used vehicles have declined in sync.
Cox Automotive said new-vehicle prices have been lower than year-earlier levels for 10 consecutive months. At the same time, manufacturer incentive spending has climbed along with increased inventory of new cars.
New-vehicle incentives in July were nearly 60% higher than a year ago, and "while we’re not back to the crazy days of incentive packages equal to roughly 10% of average transaction price — we’re close to 7% today — the market sure looks to be heading that way," Mark Schirmer, director of Industry Insights at Cox Automotive, wrote in an email.
Age of the trade-in determines a purchase
Edmunds data also showed that a typical used car in the second quarter was 4.5 years old with 52,478 miles on it. The typical used EV was 2.7 years old with 29,430 miles. So a shopper willing to consider electric propulsion and wanting a newer used vehicle might find a deal in a lightly used EV.
Drury said a general rule is that the older a trade-in car is, the more likely that owner will buy a used car because they often can't stomach the high sticker prices on most new vehicles. For example, the data showed that, of those trading in 5- to 6-year-old cars, 65% bought a new car. Only about half of those trading in vehicles 9 years old bought a new vehicle, Drury said.
The Chevrolet Trax and Buick Envista were exceptions to that rule. Edmunds data found that people who traded in older used cars would buy new Trax or new Envista compact SUVs because of the low price. A 2024 Envista starts at $22,400 and the 2024 Trax at $20,400.
“You have first-time buyers and people with older trade-ins buying those vehicles," Drury said. "I credit the Trax and Envista with saving General Motors' Q2 sales. If you take those two out, GM would be flat or down versus up.”
For the second quarter, GM reported a gain of 0.6%, to 696,086 vehicles sold in the United States.
The volatile used EV market
But used EVs are causing problems for owners seeking to trade in their vehicles as well as sellers aiming to forecast an accurate price for them, Drury said.
That's because the rate of EV adoption, while growing, is not maintaining the pace experts predicted a few years ago. The slowdown has prompted some automakers to tweak production plans, such as GM saying in June it would trim its targeted production of its new EVs in 2024 from between 200,000 and 300,000 to between 200,000 and 250,000.
As the Free Press has recently reported, factors holding back EV adoption include the fact that most new EVs command a higher price than their gasoline counterpar; continued range anxiety by drivers, and concern over a lack of public chargers that consistently work.
As a result, many automakers are offering a slew of incentives to move new-EV inventory and even price reductions, Drury said. There are also heavily subsidized lease offers on EVs. Fold in the use of the Inflation Reduction Act tax credit of up to $7,500 off domestically produced new EVs and Drury said the trickle-down effect on the used vehicle market has been significant.
"If you look at the new EVs and those crazy lease deals, then look at the used equivalent, they can’t compete," Drury said. "I’ve heard some dealers say they won’t even take a used Tesla on trade because they’re too hard to sell with the constant decrease in price. The new car market is tramping down these prices."
For people who hesitate to buy used cars, buying a used EV might invoke deeper concerns. But Drury said most used EVs come with an eight-year powertrain warranty to ease any qualms, and, he said, "the deal could be so good, they may buy it anyway."
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Contact Jamie L. LaReau:jlareau@freepress.com. Follow her on Twitter@jlareauan. Read more onGeneral Motorsand sign up for ourautos newsletter.Become a subscriber.
