Used Car Prices Have Peaked; Get Ready for Deals in 2023
Used car prices are falling in 2023
A new report from JP Morgan says the used car market has cooled and is showing “signs of normalization.” Used-car prices are falling, and the index used to track prices at wholesale used-car auctions hit a high in January and has fallen about 15% since then. The company expects used car prices to fall by 10% to 20% in 2023 as more new cars are built.
The car market (unless you’re a dealer) seems to be stuck in a vicious circle. A shortage of new cars means a demand for used cars. Demand for used cars means higher prices. However, at the same time, the number of used cars available for trade-in is decreasing. The cost of used cars and trucks skyrocketed simply because supply was low and demand was high.
However, new car prices are rising but falling
According to JP Morgan, the average price of a new car, truck or SUV increased by $3,462 in September 2022. This means that the vehicle averaged $45,622, his fourth highest average price ever. That means premium SUVs like the $45,000 Toyota RAV4 Prime and his $43,000 Jeep Grand Cherokee are now average-priced vehicles.
JP Morgan said the industry as a whole will see a world of “less volume and higher prices” going forward. This means dealers will have fewer cars and trucks to sell, and will try to make more profit from each car or truck they sell. JP Morgan expects new car prices to fall 2.5% to 5% in 2023.
Inflation could also affect new car sales
JP Morgan said the high price had created a “disruption of demand”. Overall, car and truck sales are down. However, rising interest rates can also have a significant impact on new car sales. A 1-point increase in interest charges translates to a $20 monthly increase on an average $45,000 vehicle loan.
Despite the problems, electric car sales are on the rise
Electric vehicle sales now reach 12% of the market, according to JP Morgan. Twenty-five percent of Americans are now considering buying an electric vehicle, but the high cost of electric vehicles still keeps buyers away. But there are some new, cheaper EVs coming that could change that. The Chevy Bolt and Nissan Leaf are currently under $30,000, while VW’s ID.4 SUV and Kia Niro start at around $39,000. These low-cost EVs could lead more people to switch to EVs in 2023.