It's sticker shock and then what's happening to America. used car market. Prices for cars that are slightly less than new have risen sharply over the past few years. Before the pandemic, the average price of a three-year-old car was just over $22,000. In 2025, the cost will exceed $31,000. And according to Edmunds, who tracks the auto market, that figure could soon look like a bargain.
“I mean, this is mind-boggling to anyone who had the pleasure or context of making a purchase before 2020, right?” says Ivan Drury, director of analytics at Edmunds.
Perhaps you remember used car apocalypse located inside a global apocalypse during the COVID-19 outbreak. Disruptions in the supply chain for the production of new cars, increased competition from car rental companiesand a surge in demand from consumers looking to socially distance from others while driving has sparked a scramble for older vehicles. Like so much else after the pandemic, used car sector does not return to normal. The average price of all used car transactions is below the peak of the pandemic, but still thousands of dollars more than six years ago. Prices are rising again, with the latest data from the Bureau of Labor Statistics showing they have risen 6% over the past year.
“These hangover effects from so much upheaval that happened many years ago are all showing up now,” Drury says.
Given the combination of tariffs and the continued rise in new car prices, the future could be even worse. The answer to the age-old question of when is the “best time” to buy a used car may now forever be: “There is no better time.” And when it comes time to buy a car, new or used, I hope you take the time to shop around.
Or, as Drury puts it: “It’s not just about restoring your expectations, but about coming to terms with today’s new reality, which, unfortunately, is not in your favor.”
To state the obvious: Before a machine can be used, it must be new. So when there is a decline in the number of new cars coming off the lot, it further hits the used car market. Millions fewer new cars have been sold in the United States in recent years, according to Edmunds. From 2014 to 2019, 16 to 17 million new vehicles were sold annually in the United States. From 2020 to 2022, this number dropped to 13–14 million each year. Sales are rising again—Edmunds estimates sales will finally top 16 million again this year—but even with the recovery, pandemic-era ripple effects semiconductor shortage and other supply chain and sales issues continue to have an impact.
“These cars never entered the automotive ecosystem to become used cars for consumers, and that's the crux of the matter now, that's where the hole has left,” says Jeremy Robb, senior director of economic and industry research at Cox Automotive.
There just aren't many people going to car dealerships to trade in cars they bought new two, three or four years ago. And if they appear, it will be with cars that were more expensive primarily due to pandemic-era pressures. Stephanie Brinley, an auto analyst at S&P Global, said supply chain issues forced automakers to focus on “the most popular models and the most popular trims,” which tended to be in the mid-to-upper price range.
“So you have a combination of a car that was more expensive to begin with and relatively little supply,” Brinley says.
Leasing is a factortoo much. Typically, about 30% of new cars are leased each year, Robb explains, but in 2022 that figure has dropped to about 17%. Automakers would rather customers just buy a car outright—they make more money off it—so increased consumer competition for a limited supply of expensive new cars reduced the need for manufacturers to offer leasing terms as they sold premium cars at nearly full price. Most leases last for 36 months, after which the vehicle is often traded in and put on the used car market.
“Lease lengths have really been declining over the last year and a half and will continue to decline,” Robb says.
In addition to the pandemic, the new car market is experiencing other, generally unpleasant, shifts for consumers that are spreading to the used car market. New cars have become extremely expensive as people equip their cars with all sorts of expensive features and technology. As the price of a new car goes up, used cars of the same model will also go up in price, as they tend to be related to each other. American drivers are leaning toward larger, more expensive cars, which suits automakers because larger models tend to generate more profit. Many more affordable and smaller cars were taken off the market altogether. Ford FocusChevy Cruz and Dodge Dart. The effect is multiple: used cars become more expensive because they were more expensive when new, owners may hold on to them longer to justify the higher price, and some more cost-conscious potential new car buyers are priced out of the market.
“We're not seeing a significant expansion in new cars and definitely not entry-level new cars, so people who would like to buy a $30,000 entry-level model are forced into the used car market,” says Sam Fiorani, industry analyst at AutoForecast Solutions. Some manufacturers are starting to notice the missing parts of their lineups and fill them, but even for them prices are rising quickly. “Where not too long ago the entry level was $15,000, it is now suddenly approaching $30,000,” Fiorani says.
“Any time you do something that increases the cost of a new car, they're already at such a high level that you're actually creating another used car consumer,” Robb says.
When I ask analysts and auto experts whether the used car price picture will get better anytime soon, the answer is more or less… not really. Although cars are taking longer to sell as people search for deals and mull them over, demand hasn't dropped. Nathan Garnett, chief business officer at online marketplace OfferUp, tells me that while used car prices on the platform have risen over the past year, the level of sell-through has remained stagnant. “Buyers are willing to pay these prices,” he says.
This makes sense: the US is very car dependent, and if you need car to get to work or school, or grocery store, you need a car, period. Plus, driving can be a fun and enjoyable way to get around.
As in many other industries, tariffs elephant in the room. S&P Global's Brinley says the implications are “the thousand-dollar question.” Many automakers have been eat the costs of tariffsalthough this cannot continue forever if trade uncertainty continues. Brinley says they are “cautiously watching” the strengthening of trade agreements with the EU and Japan, but there are larger questions surrounding negotiations between the US, Canada and Mexico, especially with the free trade agreement between the three countries up for renegotiation in July 2026. “In the meantime, automakers are going through a lot, so prices will go up,” she says.
You can't make new used cars.
While tariffs haven't played a big role yet, their anticipation has caused some people to cancel their plans. buying a new car to avoid expected price increases in the future. This is good for the used car market because they traded in their old cars, but at the same time dealers, who also expect higher prices, paid more for the trade-in than they would have otherwise. “It's a little confusing for the market,” Drury says.
Tariff-driven purchases also weren't linear, says Kevin Roberts, director of economic and market information for CarGurus, an auto research and sales website. They saw new and used car sales rise in March and April, around the time of Donald Trump's presidency. Liberation Day tariff announcements, normalize, and then recover again by the end of the summer. “I think people were just saying, ‘Oh, prices might go up even more. I should go get the car now if I'm looking for one,” he says.
One of the most unpleasant realities of the American economy after the pandemic is that prices will not return to their previous levels. Although inflation has slowed, we won't see widespread deflation (nor do we want to). This means resetting your expectations before you hit the lot, developing some price tag amnesia, and saying goodbye to the 2013 prices you may have in your head. There are deals out there, of course, but they're hard to find, and $20,000 that would have gotten you a reliable three-year-old car 10 years ago will now get you an 8-year-old car with 80,000 miles. We made a bed in used cars, and now we have to lie in it.
“You can't make new used cars,” Fiorani says.
Emily Stewart is a senior correspondent for Business Insider covering business and economics.
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