ACV facts & figures
This content has been reviewed and updated on January 9, 2024.
Over the past few years, the used car market has experienced notable shifts thanks to a "perfect storm" of market conditions. A historic chip shortage weakened the new car market. Low interest rates, pent-up demand, and consumers flush with tax refunds drove up asking prices. To top it all off, the rental car market anxiously sought new vehicles while ceasing to pump used models into the market.
Finally, in 2023, used car prices fell from the all-time highs reached during the COVID-19 pandemic. Compared to August 2022, wholesale used vehicle prices were down 7.7% in August 2023¹. Prices in 2023 are still higher than the historical levels and will likely remain so in 2024, but in general, prices are declining.
What can dealerships expect from the used car market heading into 2024? Exploring the trends from 2023 and some predictions for 2024 will help dealers stay ahead of the curve and primed for ongoing success.
Used Car Market Trends Observed in 2023
Slowing Sales of Electric Vehicles
In 2021 and 2022, high gas prices contributed to the rising popularity of electric vehicles and hybrid vehicles. Electric car sales—of both new and used vehicles—grew tremendously in 2022, but that growth has slowed in 2023. Average gas prices across the United States are now close to their lowest levels in two years, potentially leading to this slowing of electric vehicle sales².
Starting in 2024, electric vehicle buyers will have access to federal tax credits of up to $7,500, in addition to many new models to choose from as more automakers enter the EV market³. Despite these incentives, it’s unlikely for electric vehicle sales growth to hit the same heights as in 2022. Still, plenty of used vehicle shoppers are looking for fuel-efficient vehicle options. Dealerships should be sure to stock a variety of vehicles in this category, including electric vehicles and hybrid vehicles.
Auto Worker Strikes Affecting Production
In September 2023, the United Auto Workers went on strike to gain higher wages and improved employment benefits. The strike affected three major automakers—General Motors, Ford Motor Company, and Stellantis—and lasted more than a month⁴. For all three automakers, the strike led to significantly increased costs as well as some potential parts shortages due to disrupted parts shipments. The vehicle market did not experience immediate price hikes while the strike was ongoing, but these increased costs may eventually lead to long-term price increases from these automakers.
In the meantime, dealerships had to rely on their existing inventory from these three automakers. Experts expect that the supply chain will bounce back now that the union has agreed to deals with each impacted automaker. It’s important to note that these “Big 3” automakers don’t have the same control over the U.S. auto market that they once did. Collectively, they make up just 39% of the market, leaving plenty of room for other automakers who weren’t affected by the strike to keep prices lower⁵.
Vehicle Brand Loyalty Remains Low
In 2022, limited used car inventories were making it more difficult for used car shoppers to remain loyal to a specific auto brand. They had to expand their search to include vehicles from other brands to find affordable options that fit their needs. This trend of diminishing brand loyalty from auto shoppers has continued into 2023.
As J.D. Power's vice president of data and analytics, Tyson Jominy, said, "As vehicle availability increased and more choices hit the market, loyalty among brands as a whole saw a decline [in 2023]. Consumers are looking to get behind the wheel of something different and are no longer remaining as loyal to a brand⁶."
Because of the limited used car inventory and slowed vehicle production, dealers would be wise to market their new and used vehicles simultaneously. Consumers are less set on whether they are buying a used or new vehicle instead of making the decision based on available stock and prices. This is the time to get into dealer auctions to help you find great inventory.
Predictions for the 2024 Used Car Market
Each new year brings new trends and developments in the vehicle market that dealers must stay on top of. The following are some of our predictions for car price trends and other used car market trends in 2024.
Used Car Prices Continue to Fall
In 2024, we expect the market to continue the used car price trends of 2023 and fall even closer to pre-pandemic levels. New car inventory in the United States is rising after years of low, and this increased supply is likely to lead to lower prices in both the new and used car markets. The market continues to stabilize after the past few years of disruptions, and lower prices will be one clear representation of that recovery. Wholesale used car prices were down almost 10% year-over-year in June, and retail prices generally follow these wholesale price trends⁷.
High Interest Rates Limit Buyers
Despite the appealing price car price trends, car buyers will still be faced with budgetary concerns in 2024 thanks to high interest rates. Currently, auto loan interest rates for both new and used vehicles are quite high, and we expect this to continue into 2023. On average, new car loans have a 7.4% interest rate, and used vehicles have a 11.6% interest rate⁸.
Since most car buyers choose to finance their purchases, these high interest rates have a significant effect on the vehicle market. Dealers should price their vehicles accordingly and be open to negotiating prices to help buyers find vehicles with affordable monthly payments for them.
End to the Seller’s Market
During and immediately following the pandemic, dealers enjoyed a period of relatively high profitability. In 2024, however, dealers should brace for an end to the seller’s market as profitability falls. Labor costs are increasing, and material costs for new car assembly and parts for service departments remain high, meaning vehicles are not getting any less expensive. Despite this, dealers will increasingly need to offer incentives and discounts to entice customers as supply increases. Buyers won’t be willing or able to pay as much for vehicles in 2024, likely cutting into dealers’ margins.
Help Your Dealership Thrive in 2024
To protect your bottom line, dealerships need to be as efficient as possible in 2024. So, how can dealerships stay competitive and capitalize on used car market trends?
Keep your used car inventory diverse, prioritize fuel-efficient vehicles, stock cars with good resale value, and market your comprehensive inventory rather than car prices themselves.
Register with ACV Auctions to get started.
Sources
- Wayland, M. (8 September 2023). Used vehicle prices may have bottomed for 2023 after August increase. CNBC. Retrieved 21 December 2023 from, https://www.cnbc.com/2023/09/08/used-vehicle-prices-may-have-bottomed-for-2023.html
- Bomey, M. (14 December 2023). $3 per gallon gasoline is in sight amid record U.S. oil production. Axios. Retrieved 21 December 2023 from, https://www.axios.com/2023/12/14/gas-prices-down-low-today-chart
- Ewing, J. (16 December 2023). Fewer Electric Vehicles Will Qualify for Federal Tax Credits in 2024. New York Times. Retrieved 21 December 2023, from https://www.nytimes.com/2023/12/16/business/electric-vehicle-tax-credits.html
- Shepardson, D. and White, J. (30 October 2023). UAW reaches deal with GM, ending strike against Detroit automakers. Reuters. Retrieved 21 December 2023, from https://www.reuters.com/business/autos-transportation/gm-reaches-tentative-deal-with-uaw-source-says-2023-10-30/
- Domonoske, C. (23 September 2023). How the UAW strikes could impact car shoppers. NPR. Retrieved 21 December 2023, from https://www.npr.org/2023/09/23/1200614584/uaw-strike-big-3-shawn-fain-ford-gm-stellantis-car-prices-repairs-spare-parts
- Brand Loyalty Declining Among New-Car Buyers. AIADA. Retrieved 21 December 2023, from https://www.aiada.org/news/first-up/brand-loyalty-declining-among-new-car-buyers
- Tucker, S. (20 June 2023). Wholesale Used Car Prices Down Dramatically. Kelley Blue Book. Retrieved 21 December 2023, from https://www.kbb.com/car-news/wholesale-used-car-prices-down-dramatically/
- Ballentine, C. (18 December 2023). 'Underwater' Car Loans Signal Consumers Slammed By High Rates. FA Magazine. Retrieved 21 December 2023, from https://www.fa-mag.com/news/-underwater--car-loans-signal-u-s--consumers-slammed-by-high-rates-75818.html
