This is a classic illustration of how inflation may completely destroy a consumer’s purchasing power. Pre-pandemic 2019, the average price of a secondhand car was slightly over $23,000; today, it sells for about $32,500, a 41% rise. In order to keep a car at the same level of affordability in 2023, a buyer with about the same budget would have to settle for a six-year-old model. Furthermore, used prices have already decreased somewhat during the last 12 months.
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This is supported by a recent analysis done on the basis of more than 21 million used automobile transactions that were registered between 2019 and 2023 by the online automotive marketplace iSeeCars.com.
Yes, we may hold the law of supply and demand—our old friend from Economics 101—for pricing many financially stressed consumers out of the market or forcing them to settle for an older model that may be too old for them. A shortage of current model year used automobiles is being caused by the decrease in new vehicle production from 2020 to 2022, which is linked to both initial factory shutdowns and ongoing supply-chain difficulties.
“In the used car market, pandemic plant shutdowns have finally come to haunt us,” says Karl Brauer, Executive Analyst at iSeeCars. There are just not enough models to fulfill demand, with between 20 and 45 percent fewer one- to three-year-old secondhand cars on the market. This makes buying considerably older cars necessary for used car buyers to keep inside their budget. Customers that previously shopped for late model year used automobiles now have to spend considerably more or consider much older vehicles, as the supply of 1- to 3-year-old used cars is down between 20 and 45 percent.
In addition to the laws of supply and demand, rising gas costs are making the affordability problem even more acute. This is because some of the most severe price hikes for used cars come from brands that were once among the most reasonably priced and fuel-efficient vehicles available. In recent years, automakers have been cutting back on their slower-selling small car lines in favor of the more thirsty SUVs and pickup trucks that new car customers have been gravitating toward. This thus reduces the number of used subcompact and tiny cars that are available.
For example, a three-year-old Chevrolet Spark minicar—which was canceled for 2023—went for about $9,900 in 2019; one would have to settle for a nine-year-old model to get one now for the same amount of money. The largest price increases, per iSeeCars.com, are seen in six-year-old pre-owned cars, which currently fetch an average of $54,210 instead of $15,777 in 2019, a 53.4% increase, and in one-year-old vehicles, which now fetch an average of $46,403 instead of $27,793 in 2019, a startling 67% increase.
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According to an earlier iSeeCars.com survey, pre-owned electric and gas/electric hybrid cars are among the vehicles that have seen the largest decreases in transaction prices over the past year, so those looking for the best values in the used car market should give them some thought.
Alongside their recent reductions in the price of their new models, used Tesla costs have also decreased. Since mid-2022, the value of the Model X SUV has decreased by 21.3%, while the Model 3 car has lost 30.5% of its worth. Other affordable used electric vehicles are the Nissan Leaf, which lost 19.2% of its average value in the last year; the Tesla Model S, Hyundai Ioniq Hybrid, and BMW 5 Series Plug-In Hybrid, which have all lost 19.0%, 16.2%, and 15.5% of their average value, respectively.