According to an industry report from Cars Commerce released on Thursday, strong demand for new cars in May led to a 7 percent decline in used car prices and an increase in inventory from trade-ins.
“The rise in new-car sales, especially during seasonal promotions like Memorial Day, boosts the used-car market. More new-car inventory means more new-car sales, which means more trade-ins, increasing used-car inventory and bringing prices down — and that’s just what we’re seeing this month,” senior director of industry data and insights at Cars Commerce Rebecca Lindland said. “On average, used cars are selling slightly slower now than last year, when the market was quite lean. Prices are still elevated for new and used vehicles, but today, shoppers have more inventory, more choices and more time to find the vehicle that fits their budget and lifestyle.”
On average, used vehicles now cost $20,000 less than new ones, which the report notes is the largest price gap since 2018. Additionally, the cost per odometer mile has gone down in 2024 compared to 2023.
The average price of a used car is now $28,861, while the price of new cars has remained steady at around $49,000.
For years, both new and used cars have seen steep price increases due to the impact of COVID-19 lockdowns and shortages of key components like computer chips.
In addition to price spikes of up to 30 percent, interest rates have more than doubled in that time period as well. Higher interest rates mean higher monthly payments for the majority of consumers who finance their vehicles.
However, new car inventory has begun to rebound. Cars.com reported the total new-car inventory on its website as 2.32 million vehicles, the highest since December 2020.
Interest in electric vehicles (EVs) is rising due to an increase in searches for EVs, but sales remain tepid because of their higher prices. On average, EVs cost $63,030, which is 28 percent above the average price of gasoline-powered vehicles.
Increases in inventory are bringing prices down, including a 19 percent price drop in used EVs. There are also tax credits available for purchasing these cars, which are said to be better for the environment.
Some EVs less than three years old with low mileage of around 37,000 have now become available on the general market for purchase.
Just a month earlier, new car inventory was a million lower than 2019 levels even though prices were 30 percent higher in that time frame, according to the April report. At that time, the ten most searched used cars rose in price from the previous month.
The new report shows that the market has stabilized, at least for now, and has begun to move in a positive direction for consumers.
The latest Consumer Price Index numbers released Wednesday showed that overall inflation remained stable at 3.3 percent for the second month in a row.