Buying a used car? Now may be the perfect time.

The Used Car Market is Heating Up with Lower Prices and Better Deals

If you're in the market for a used car, there's never been a better time to shop. The used car market is experiencing a surge in availability, with prices dropping significantly compared to previous years. According to recent data from Edmunds.com, the average price paid for used vehicles in the second quarter of 2024 was nearly 7% lower than the same period last year. This trend is not just about lower prices—it’s also about faster sales. The average time it takes for a used vehicle to be sold has remained relatively stable at 35 days, indicating that dealers are still moving cars quickly, even as consumers get more value for their money.

Economists have long studied the principles of supply and demand, but the current used car market offers a real-world example of these concepts in action. Ivan Drury, director of insights at Edmunds.com, explained that the increase in supply of used cars has helped bring down prices. This rise in inventory is partly due to improved new car production, which has led to more trade-ins entering the used market. As a result, buyers are seeing significant discounts on both traditional and electric vehicles (EVs).

Price Trends in the Used Car Market

The drop in used car prices is most noticeable in the EV segment. In the second quarter of 2024, the average transaction price for used electric vehicles fell by 20.8% compared to the same period in 2023. For example, a 2021 Tesla Model Y that originally sold for $69,570 is now available for around $31,064. Similarly, a 2021 Toyota RAV4 Hybrid saw its price drop from $41,298 to $30,006 over the same time frame. These steep declines have made used EVs one of the most affordable transportation options on the market.

Here’s a breakdown of the average transaction prices for different types of used vehicles in Q2 2024 compared to Q2 2023:

• Used Vehicle: $27,319 (a 6.8% decrease)
• Used Electric Vehicle: $33,787 (a 20.8% decrease)
• Used Hybrid and Plug-in Hybrid EV: $30,416 (a 5.1% decrease)

These trends mirror what’s happening in the new car market, where prices have also seen a slight decline. The average transaction price for new vehicles in Q2 2024 was $47,424, down from $47,866 in Q2 2023. However, this decline is less dramatic because some of the discounts come in the form of financing deals or longer-term loans, which don’t always show up in the final transaction price.

Inventory and Incentives Are Shifting the Market

Cox Automotive reported that new-vehicle prices have been lower than the previous year for 10 consecutive months. At the same time, manufacturer incentives have increased as dealerships work to clear out aging inventory. In July, new-vehicle incentives were nearly 60% higher than a year earlier. While these incentives aren't yet at the levels seen during the peak of the incentive era, they’re getting closer, with incentives now averaging around 7% of the transaction price.

This shift in the market has had a ripple effect on the used car market. As new cars become more affordable, the value of newer used vehicles has also declined. This means that buyers can find great deals on slightly older models without sacrificing too much in terms of reliability or performance.

Trade-In Age and Buying Behavior

Edmunds data shows that the typical used car on the market is 4.5 years old with around 52,478 miles on it. For used EVs, the average age is younger—just 2.7 years old with about 29,430 miles. This suggests that buyers looking for a newer, lightly used EV may find better deals than those shopping for traditional vehicles.

Drury noted that the age of a trade-in car plays a big role in a buyer’s decision. Owners of older cars are more likely to purchase a used vehicle because they can’t afford the high sticker prices on new cars. For example, 65% of people trading in 5- to 6-year-old cars bought a new vehicle, while only about half of those trading in 9-year-old cars did the same.

However, there are exceptions. Vehicles like the Chevrolet Trax and Buick Envista have proven popular among buyers with older trade-ins due to their low starting prices. These compact SUVs have helped boost General Motors’ sales, with the company reporting a 0.6% increase in U.S. vehicle sales in Q2 2024.

Challenges in the Used EV Market

Despite the overall positive trends, the used EV market remains volatile. The rate of EV adoption has not met earlier predictions, leading some automakers to adjust their production plans. For instance, General Motors recently reduced its 2024 EV production target from 200,000 to 300,000 units to between 200,000 and 250,000 units.

Factors such as higher prices for new EVs, range anxiety, and limited public charging infrastructure continue to slow adoption. To combat this, automakers are offering incentives, including lease deals and tax credits under the Inflation Reduction Act. These factors have contributed to a sharp decline in the value of used EVs, making them harder to sell.

Despite these challenges, many used EVs come with an eight-year powertrain warranty, which helps ease concerns about reliability. For buyers who are open to electric propulsion, the deals available today could be too good to pass up.