ACV facts & figures
This content has been reviewed and updated on May 12, 2023.
It should be no surprise that used car prices have skyrocketed over the last few years. If you deal in used cars, you may have enjoyed the shift. But is this here to stay, or will car prices drop significantly sometime soon? The truth is that automotive industry forecasts expect prices to continue fluctuating for the foreseeable future. Moreover, we may not see prices drop to pre-pandemic levels for a very long time, if at all.
Below we’ll discuss the current state of the used car market, inflation, and what experts predict for the future.
What Can We Expect for Used Car Prices in 2023?
In 2021, the value of used cars increased dramatically. Retail prices climbed up by 36%, and wholesale used car prices jumped by 52%, prompting questions like, “When will car prices drop again?”
In 2022, used car price trends were less consistent. After a long stretch of record-breaking highs, prices finally dropped nearly 5% during the first quarter of 2022¹. Then, in April, we saw prices begin to level off before appreciating again.
So far, in 2023, used car prices are on a downswing. Between September 2022 and March 2023², used car prices fell 4.7%. JP Morgan predicts³ that demand for used cars will slow down this year, leading to a 10% drop in used car prices.
“We’ve most likely passed the peak of prices,” says Alex Yurchenko, chief data science officer at Black Book. Yurchenko also notes pricing “is a complicated question, and there are a lot of nuances to it. We’re starting so high that we’re not going to get to the pre-COVID level any time in the foreseeable future.”
What Caused Used Car Prices to Skyrocket in the First Place?
There were two major reasons for the rapid rise in used automobile costs. The first was the global microchip shortage which heavily contributed to the lack of new car production starting in March 2020. Luckily, the worst of the microchip shortage is now over⁴. The CHIPS and Science Act increases investment in research and manufacturing, which will continue benefiting the auto industry.
The second was the conflict between Russia and Ukraine. The threat of limited raw materials and crude oil due to the conflict prompted fears of even greater chip scarcity⁵.
Are Car Sales Down in 2023?
According to Fortune, auto sales in 2023 so far are at their lowest levels in over a decade⁶. But even though car sales are down, the answer to the question “Are car prices still high?” is yes.
High interest rates and ongoing high prices are likely contributing to the low sales figures. Many consumers are not currently able to purchase a vehicle, even though vehicle inventories are higher now than in recent years.
Consumer Demand for Used Cars in 2023
Due to the drop in demand, dealers may notice sales declining somewhat in the next few months. Inventory inconsistency means price cuts are not on the menu. Yet, consumer frustration with the market has signaled renewed purchasing vigilance. According to CNBC, the average time consumers spend looking for a used car has jumped 93% to 171 days from 89 days in March 2021⁷. Historically, beggars can’t be choosers, but it seems modern consumers are taking their time being selective.
Dealing With Dips in the Market
Because the automotive market will always ebb and flow, it’s important to keep a few creative strategies in your back pocket to get the most out of your available inventory and customer base.
Focus on the Inventory You Have
If your bestsellers are in short supply, focus your attention and advertising budget on those that are available. Check out our How to Run a Car Dealership Online Advertising Campaign post for more ideas.
Take Control of Inventory Sourcing
Wholesale online dealer auctions like ACV allow you to source nationwide, and they offer convenient transportation services so you can efficiently zero in on the inventory you need. You can also consider looking for trade-ins, lease buybacks, or even buying used cars from past customers.
Create a Specific Target Customer Persona
Sometimes, our marketing campaigns are too broad. Consider more specific target audiences. Be creative when thinking about these audiences. Can you run a specific campaign for lease buybacks? Trade-ins? Don’t be afraid to think outside the box!
Utilize Vehicle Servicing
A shortage of vehicles in your inventory doesn’t mean a shortage of maintenance needs. Offering deals on routine maintenance and repair stops is a no-brainer in leaner moments. Consider highlighting services that you offer on social media and your website.
Want to learn more about maintaining proper inventory? Check out How to Source Smart and Maintain Used Car Inventory Levels.
Grow Your Business With ACV Auctions
Wholesale auto auctions are one of the most efficient ways to get your hands on high-quality new and secondhand autos. Join ACV Auctions today to get direct access to the inventory that’s best suited for you and your business.
- Shefska, Z. (4 January 2022). Used Car Price Trends in 2022. CarEdge. Retrieved May 12, 2023, from https://caredge.com/guides/used-car-price-trends-for-2022
- Vaughn, M. (23 March 2023). Used-Car Prices Are Finally Dropping. Autoweek. Retrieved May 12, 2023, from https://www.autoweek.com/news/industry-news/a43377799/used-car-prices-are-finally-dropping/
- Inflation and the Auto Industry: When Will Car Prices Drop? J.P. Morgan. Retrieved May 12, 2023, from https://www.jpmorgan.com/insights/research/when-will-car-prices-drop
- Browne, R. (17 January 2023). The worst is over for the global chip shortage, ABB chairman says: ‘I’m quite optimistic.’ CNBC. Retrieved May 12, 2023, from https://www.cnbc.com/2023/01/17/worst-is-over-for-global-chip-shortage-abb-chairman-says.html
- Hamilton, E. (21 February 2023). The global supply chain consequences of the Russia-Ukraine war. University of Florida News. Retrieved May 12, 2023, from https://news.ufl.edu/2023/02/russia-ukraine-global-supply-chain/
- Krishner, T. (5 January 2023). Auto sales plummet to their lowest levels since 2011—but deals are on the horizon for consumers. Fortune. Retrieved May 12, 2023, from https://fortune.com/2023/01/05/auto-industry-sales-lowest-since-2011-deals-coming-2023/
- O’Brien, S. (7 April 2022). Demand for used cars drops from a year ago but high prices aren’t budging. CNBC. Retrieved May 12, 2023, from https://www.cnbc.com/2022/04/07/demand-drops-for-used-cars-but-high-prices-arent-budging.html
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