As the automotive industry closes the books on 2025, the used car market is in a bit of a weird spot. According to the latest CARFAX Used Car Index, prices remain much higher compared to this time last year, yet recent data suggests a reduction in prices that could signal relief for buyers in the new year.
Used Prices Up Year Over Year
Despite an array of different economic fluctuations throughout the year, used vehicle values have demonstrated remarkable stickiness. The index reveals that prices are higher for six out of seven vehicle categories compared to the same time in 2024. The luxury segment has firmly led this category all year, with average prices for used luxury cars jumping more than $2,000, or eight percent, year over year. This has been in part due to sustained demand for premium vehicles even in a market where many buyers are balking at high prices.
Pickup trucks, a perennial staple of the American market, also saw increases, with prices up more than $1,200 (3.7 percent) from a year ago. Similarly, luxury SUVs rose by approximately $850 (2.6 percent), and the combined category of hybrids and electric vehicles (EVs) saw a modest increase of over $600 (2.1 percent). The only segment to buck this inflationary trend was vans and minivans, which saw a decline of roughly $300, or 1.6 percent, year over year.
A Month-End Pivot
While the annual view suggests a market with severely inflated prices, the short-term data offers a contrasting perspective. December marked the beginning of a shift, with prices falling month over month in five of the seven tracked categories. This recent cooling is particularly notable in segments that had seen record high prices earlier in the year.
Luxury SUVs, for instance, have been on a downward trajectory for five consecutive months, shedding more than $1,200 in price over that period. Hybrids and EVs have followed a similar path, dropping more than $1,100 over the same five-month stretch. This specific decline is partly attributed to the expiration of federal tax credits for used EVs, which has recalibrated market values downward.
Both SUVs and passenger cars are continuing a four-month decline, with SUVs down approximately $500 and cars down about $300 on average. Even the high-demand pickup truck segment has seen prices fall for three straight months, decreasing by more than $400.
Regional Variations and Market Dynamics
The CARFAX data underscores that real estate isn’t the only market where “location, location, location” matters. Regional trends varied significantly in December. In the West, used luxury cars surged by more than $1,000, whereas the Plains region saw that same segment drop by nearly $1,000. Meanwhile, the Northeast experienced a broad downturn, with all segments dropping in price last month, led by a steep $800 decline in hybrid and EV values.
Several structural factors are influencing these shifts. The market is slowly recovering from the lease shortage of 2021 and 2022. As leasing volumes picked up in 2023, the supply of appealing three-year-old off-lease models is expected to stabilize, potentially easing inventory constraints and pricing pressure further.
Implications for Dealers and Consumers
For dealerships, this data suggests a need for agile inventory management in the new year. While inventory values on the lot may be higher than a year ago, the recent month-over-month dips indicate a softening that requires careful pricing strategies to maintain turn rates.
For consumers, the message is one of cautious optimism. While overall price tags remain higher than in 2024, the recent downward trends—particularly in popular segments like SUVs and trucks—suggest that patience is beginning to pay off. Prospective buyers of used EVs, in particular, may find the coming year advantageous as a significant number of electric vehicles are expected to come off lease in 2026, potentially saturating the market and driving prices down further.
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