Used car buyers are finally being rewarded for their patience

Compared to the glacial decline of new vehicle prices, used car affordability is finally heating up, bringing buyers and dealers additional relief in the final stretch of 2024.

Driving the news: Used vehicle values are moving downwards after a long and challenging period of rising prices.

• According to iSeeCars, one-to-five-year-old used cars sold for an average of $32,672 this August, down 4.7% from the same point in 2023.

• Averages don’t tell the whole story, however. Price declines are actually being driven by a small surge in models priced below $20,000, which now account for 16.5% of the used car market. That represents a 30% jump compared to last year.

• The return of this price range is noteworthy. Karl Brauer, iSeeCars’ Executive Analyst, notes that around 50% of used vehicles in 2019 cost less than $20,000. Over the next four years, that number would dwindle to around 13%. This year marks a key turning point for the market.

Zooming in: In spite of affordability improvements, today’s used vehicles are still much more expensive than before the pandemic, costing about 40% more on average. Nevertheless, the return of cheaper models appears to be driving demand to preowned dealers.

• Customers are taking advantage of the improving inventory mix. Used car retail sales rose almost 14% year-over-year in August, according to Cox Automotive, hitting their highest level since late 2021.

• Dealers are likewise taking note of the increased sales pace. Inventory levels of used vehicles rose at the start of September, despite relatively stable demand compared to August, indicating retailers are stocking up.

• While dealers are using a plethora of strategies to pull inventory, they have been aided by a steady cooldown in auction prices as well. Wholesale values of used vehicles dropped 0.2% this month from August and are down 5% year-over-year.

Bottom line: While many buyers are still priced out of the market, an increasingly affordable mix of used cars is helping to boost demand. This shift is coming at a critical time for dealers, who are seeing a dropoff in new vehicle sales. Sustainable but aggressive inventory acquisition will be key to meeting demand in the coming months as the market continues to grapple with uncertainty.

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