The used car market is experiencing a wave of fluctuations and they’re not only restricted to internal combustion powertrains.
After two years of consistent price declines, hybrids and electric vehicles (EVs) have seen surging prices in May, increasing by an average of $750 from April according to the Carfax Used Car Index. This jump is even more pronounced in the West region, where prices rose by $1,100.
The rising interest in these used fuel-efficient vehicles can be, in part, attributed to economic uncertainties, including concerns over the long-term costs of car ownership. Potential customers appear to be prioritizing savings, particularly as consumer confidence recently hit a three-year low.
The consistent increase in used car prices this year is closely tied to a decline in new car inventory, which dropped by 10 percent in April. This was due to the spike in sales after import Tariffs were announced. With fewer new cars available, consumers have turned to used options, putting additional upward pressure on prices.
National and Regional Shifts
Across the United States, the average prices of used vehicles have increased this month, though the pace varied by category and region. Nationally, pickup trucks saw the second-highest price increase at $650 month over month, followed by luxury SUVs at $500, luxury cars at $350, and SUVs and minivans at $200 and $100, respectively. Sedans and other cars had the smallest increase at $160.
Regional trends were mostly consistent with nationwide trends with a few notable outliers. Out west, hybrids and EVs experienced the largest price hike, with a $1,100 increase month over month, while in the Southeast they were only up $470. The largest regional price hike wasn’t even for EVs but pickup trucks, with prices up $1,200 over last month in the Southwest. Pickups also saw the largest price increase in the South region, up $740 from April.
There were also some regions that saw segment-specific price drops. Used vans and minivans were down $170 month over month in the Mid-Atlantic while used SUVs dropped $40 in the Plains region and $140 in the Southeast. For the majority of the country however all segments were up on average.
The Impact of Damage on Car Values
One notable trend highlighted by the Carfax data is the impact of damage on used car prices. Vehicles with minor damage see a drop of hundreds of dollars in value. Meanwhile, those with major damage can lose thousands. However, cars with well-repaired cosmetic damage might represent a good deal for buyers looking to save without compromising on functionality.
Buyers vs Sellers
The sharp price increases present a double-edged sword for consumers. Those considering a used vehicle are incentivized to act quickly to avoid climbing prices. They speed up their purchases, further straining inventory and driving up prices even more. As affordability and longevity remain top of mind many consumers are targeting hybrids and EVs as their long-term savings on fuel costs may offset the initial expense.
However, for anyone looking to sell their used car, they may decide to wait out the current market to maximize profits. If prices continue to climb, selling later in the year may be a better opportunity. SUVs, pickup trucks, and hybrids/EVs are particularly popular right now and can command strong prices. This leads to a disconnect as shrinking inventory drives up prices and may drive away buyers. However, individual sellers may not rush to sell to the dealership to help replenish their stock.
The coming months will likely bring further shifts, particularly as manufacturers and dealerships adjust to supply chain changes. As long as import tariffs remain in place and new car prices continue to rise, then used cars are sure to follow.
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