Tight supply locks in elevated prices for used cars

Used car prices have largely stabilized after a turbulent few years, and the market appears set for a solid rebound in 2025, with retail sales projected to reach their highest levels since 2021.

By the numbers:

• Retail used car sales are expected to hit 20.1 million in 2025, according to Cox Automotive.

• Prices for 1- to 5-year-old vehicles have shifted less than $750 since June, with only a 3% year-over-year drop in recent months, reports iSeeCars.

What they’re saying: “Buyers waiting for used car prices to come down can probably stop waiting,” said iSeeCars Executive Analyst Karl Brauer. “Prices have barely moved over the past year, and it appears $30,000 is the new $20,000 for used car shoppers. That number likely prices a lot of consumers out of the 1- to 5-year-old used car market, forcing them to consider older, higher-mileage models.”

The catch: While prices have leveled out, dealers still face challenges with tight supply, especially for 1- to 3-year-old vehicles. This stems from production slowdowns during the pandemic and a sharp decline in lease returns.

• Lease maturities dropped 15% in Q3 and 18% in Q4 of 2024, with a projected 17% decline in 2025, according to Cox Automotive.

• Fewer lease returns mean a scarcity of 3-year-old vehicles, a critical cohort in the wholesale used market (where many dealers source inventory).

In turn — supply constraints are helping to keep prices elevated, preventing the dramatic depreciation seen during pre-pandemic times. And dealers are adapting by sourcing inventory from trade-ins, street purchases, and dealer trades, instead of relying heavily on auctions.

What’s next: Fewer lease returns and ongoing supply challenges will keep inventory tight, but a more predictable pricing environment could help dealers and consumers alike navigate the market moving forward.

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