Used Car Prices Ticking Back Up — Is the Correction Actually Over?

For buyers who patiently waited out the pandemic-era used car price insanity expecting a return to normalcy, late March 2023 brought some unsettling news. A CNBC analysis suggesting the used vehicle market may not fully “normalize” was circulating widely, and it’s worth unpacking what’s actually happening and whether the alarm bells are warranted.

Used car prices had been on a downward trend for much of 2022 after hitting historic highs driven by new vehicle inventory shortages and pandemic demand disruptions. The Manheim Used Vehicle Value Index, which tracks wholesale prices, had been declining for months — giving hope to buyers that patience would eventually be rewarded. The question now is whether that correction has stalled or reversed.

Several structural factors are preventing a full return to pre-pandemic norms. First, the supply of late-model used vehicles is genuinely constrained because new vehicle production was disrupted for two-plus years. The pipeline of two-to-four-year-old trade-ins that typically replenishes the used market is thin. Second, rental car companies that liquidated their fleets in 2020 to survive have been slowly rebuilding, which means fewer fleet disposals are flowing into the used market. Third, higher interest rates are keeping some would-be new car buyers in the used market, sustaining demand.

The short answer to whether prices are “climbing again” is: it’s complicated. Wholesale prices at auction showed some upticks in early 2023, which dealers use to justify holding retail prices firm. But the picture isn’t uniform across segments. Trucks and SUVs remain elevated and supply-constrained. Sedans are closer to pre-pandemic values in many markets. And EVs — particularly used Teslas — have seen significant price drops as new inventory availability improved and the used premium evaporated.

For buyers, the strategy advice remains the same: know your segment, compare aggressively, and don’t assume the market is monolithic. “Used cars are expensive” is too broad a statement to be actionable. The market is telling very different stories depending on what you’re shopping for, where you’re shopping, and what condition you’re willing to accept.