2023: A Used Car Market Like No Other, Part II

We've been following the used car market for 35 years.  We've never seen anything like this.

Skyrocketing prices. Little to no inventory. Bidding wars. No, we're not talking about the real estate market.  This is the reality of the used car market in 2021-and-2022--and again in 2023.  After a brief respite in early 2023, the market is ticking upward again, although not at the pace it had been. This market has been fueled by a combination of factors, a perfect storm that is pushing values unrelentingly higher.  While we've occasionally seen this in spot markets (say, after a large natural disaster), this time it is pretty much everywhere.

What's fueling this?  There are several factors; here are the most significant:


The last two are not structural, but they do play a part.  To be sure, it's costing more for dealers to fill inventory. Often, they acquire cars in markets hundreds of miles (or more) away from them as there is no supply to be had nearby. Still, undoubtedly there is gouging going on, with some dealers padding markups and charging more for add-ons beyond traditional levels.  As justification, they can simply point to the myriad of media reports about the used car market.

If you're looking to trade in for a new car, you're not going to find much relief there, either.  While you might get more for your trade-in, new car pricing is rarely being discounted, limiting your ability to capitalize on the situation.  In fact, to fully take advantage of the market you should sell your car privately a hassle which many people want to avoid. So, as usual the consumer is left holding the bag.

At some point this will end and the market will return to equilibrium.  That used vehicle you're looking at now will eventually depreciate fairly sharply.  If you can wait at all on a purchase and are concerned about money, we recommend patience.