Mixed Outlook for Used Car Prices

There has been much concern about the astronomic rise in used car prices due to high demand and the short supply of new cars. Consumers are wondering by how much will these prices continue to rise in 2022 and will their escalation ever end. Reliable sources forecast differing outlooks, some of which could bring a sigh of relief to consumers.

Edmunds predicts used vehicle prices will surpass the $30,000 mark for the first time in 2022. "Consumers who are planning on making a vehicle purchase in 2022 must prepare for a much different market and car shopping experience compared to years past," said Ivan Drury, Edmunds' senior manager of insights. "Competition for new vehicles will be fierce as inventory shortages persist, and serial lessees might need to do some extra planning and research before their lease agreement ends to find affordable options. On a more positive note, EV-curious shoppers will have a number of exciting launches to look forward to in the new year. And for all consumers who currently own a vehicle (and for many customers who currently lease a vehicle), they can expect to capitalize on the value of their trade-in since there's no indication that used values will fall off a cliff anytime soon."

Cox Automotive sees relief for used car buyers on the horizon. Cox chief economist Jonathan Smoke sees 2022 in two distinct halves. In the first half of the year, Smoke expects used-vehicle prices to remain high as they normally do in the spring due expected record-level tax refunds and ongoing inventory challenges, but sees price increases ending in the second half of 2022.

In a January 19, 2022 Auto Remarketing Podcast, Smoke said assuming new vehicles will increase in inventory in the back end of the year, it would be past tax refund season, credit trends become a little less favorable, and the industry will likely see a return to more normal price depreciation.

“Following what the fundamentals are saying, I stand by the conviction that we got one more round of price increases, then we’re going to reach the peak and then we’re going to return to a world where vehicles depreciate,” said Smoke.

KPMG goes a step further and predicts “the music will stop” for used car price hikes around October 2022 and into 2023. Data and analysis from the consulting firm indicate prices of used vehicles will fall 20-30 percent when the market senses automakers are producing a normal or close to normal supply of new cars. KMPG says the plunge could greatly impact those who bought used vehicles during the price boom. If they financed their car at an astronomically high price, they could find their loan underwater, much like what happened to homes in the Great Recession.

When in the market for a used car, stop by Carousel Preowned.  Carousel Preowned serving Iowa City, Cedar Rapids, Davenport, North Liberty, Marion, and Coralville, IA, is proud to be an automotive leader in our community. We do our best to ensure your complete satisfaction every time you step into our car dealership. This is why we offer the widest selection of used and pre-owned cars, trucks, and SUVs and provide true ease of purchase in Iowa.