The current market for used cars has stabilized somewhat compared to how it has been for the last few years. However, 2024 is just around the corner.
How will the market look next year? Analysts are saying that prices for used cars are still likely to be a little scary next year.
Used Car Prices Are Still Inflated
As we go into 2024, the prices for used cars are still inflated. During COVID-19, various supply chain issues caused production to slow down, which resulted in fewer new cars being built between late 2020 and 2022. As new car prices rose, many buyers began looking at used cars. The sudden inflated demand for used cars caused those prices to soar.
There’s still a shortage of lightly used cars. The average price for a model that’s only two years old is $37,675. In 2019, the average price for a two-year-old car was $23,886. That’s a huge jump in price and likely insurmountable for many budgets.
That’s the bad news. The good news is that inventory seems to be evening out as we go into 2024. That is, it’s less volatile than before. As such, prices have gone down from previous record highs. Make no mistake, the prices are still high, but they’re not as high as they have been.
High Prices Will LIkely Persist
Despite more optimistic inventories, high prices for used cars will likely persist into 2024. There are multiple reasons for this. When it comes to new cars, it’s generally fair to blame higher prices on the automakers. Despite the demand for more affordable models, automakers keep putting resources toward huge luxury SUVs and trucks.
Because of this, it’s inevitable that consumers turn toward used cars to find more reasonable prices and practical vehicles. The interesting wildcard is that automakers are producing overpriced vehicles to help fund their EV ventures. Unlike Tesla, most automakers are still trying to figure out how to profit from EVs.
High-Interest Rates Will Also Persist
Cash is king going into 2024. As of late 2023, the average APR for a new car loan is over 9%. Rates for used car loans are even higher with averages around 14%. The Federal Reserve has confirmed that rates will stay high through at least the first half of 2024. Even with that, auto loan interest rates are likely to stay high through 2024.
The combination of soaring prices and high-interest rates creates a situation where affordability takes a substantial hit. Many buyers will be priced out of the new car market in 2024. The overall reduced supply of used cars will likely keep prices higher than normal in 2024.
Experts believe that the inflated prices and reduced inventory for used cars will persist through the end of the decade, not just for 2024. Right now, automakers don’t have any incentive to make vehicles priced under $30,000 as they work to support their EV ventures.
If you’re in the market for used cars, it’s important to understand that high prices and limited options aren’t going away anytime soon.
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