Used car market races into 2025, but price relief may be short-lived

A report by CarGurus reveals that used inventory levels are off to a strong start in January, with prices declining for the month, paving the road for robust used car sales in 2025.

The details: The findings—drawn from the CarGurus January Intelligence Report—found that the momentum from factors such as decreasing vehicle prices, cooling interest rates, a post-election release in spending, and pent-up demand helped drive a surge in used sales in Q4 continued in January.        

• The CarGurus used vehicle demand index for January saw readings increase 2.9% month-over-month and 8.2% year-over-year. 

• Used vehicle prices—a pivotal selling point in the used car market—were down 3% year-over-year.   

• Days-on-market for used vehicles dropped significantly, falling 8.8% year-over-year.

The robust demand for used vehicles led to a decrease in used average market-days-supply, which fell 0.4% month-over-month from February to January and 3.6% year-over-year.  

Digging deeper: The year-over-year inventory for new vehicles has been quite the opposite, as automakers try to find the right balance in today’s market and lower their dependence on incentives to drive demand. 

• Inventory levels for new vehicles decreased by 3.1% month-over-month but rose nearly 17% year-over-year in January compared to 2024. 

• New vehicles now spend an average of three months on the lot, up 2.1% month-over-month and up 20% year-over-year. 

• Retail sales for new vehicles climbed 9.7% year-over-year, but seasonally cooled in January from December, dropping 17.9%.

A far cry from used vehicles, market-days-supply of new vehicles outpaced demand in January, up 11.7% month-over-month and 11% year-over-year. Prices for new vehicles continue to surge, due in part to luxury and performance EVs entering the market, with battery electric vehicles (BEVs) leading the charge in higher pricing when it comes to non-gasoline powertrains.   

Why it matters: The used market’s strong start signals where buyers are heading: toward value and affordability—boosted by tax refund season. But those lower prices may not last. Rising wholesale costs and tightening inventory could drive used prices back up quickly. Meanwhile, with incentives fading and new car prices climbing, automakers risk over-supplied inventories and mounting floorplan costs as buyers turn to the used lot for better deals.

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