Used Car Prices Are Dropping: When to Buy

Buyers who have been waiting patiently for the car market to cool down finally have a reason to celebrate. After hitting record highs over the last few years, used vehicle pricing is steadily declining. If you track these recent market shifts closely, you can find the perfect time to strike and save thousands of dollars on your next purchase.

The Current State of the Used Car Market

The extreme pricing spikes of 2021 and 2022 are firmly in the rearview mirror. According to recent data from the Manheim Used Vehicle Value Index, wholesale used car prices have dropped by roughly 6% year-over-year. This wholesale drop is directly impacting the retail prices you see on the lot.

Data from Cox Automotive shows that the average listing price for a used vehicle currently sits around $25,500. This is a massive improvement from the historical peak of over $28,000 just two years ago. The primary reason for this decline is a recovery in new car inventory. Dealerships for brands like Ford, Chevrolet, and Stellantis now have overflowing lots of new cars. Because buyers have more new options, the demand for used cars has cooled off, forcing used car sellers to lower their asking prices to remain competitive.

Which Vehicles Are Seeing the Biggest Discounts?

Not all vehicles are depreciating at the same rate. If you want to maximize your savings, you should look at the specific categories experiencing the steepest price drops.

Used Electric Vehicles (EVs) Electric vehicles are depreciating faster than any other category on the market. Used models of the Tesla Model 3, Tesla Model Y, and Chevrolet Bolt have seen their values plummet by more than 20% over the last year. You can now routinely find older Tesla Model 3s and Chevy Bolts listed for under $25,000. This specific price point is highly advantageous. If you buy a used EV for $25,000 or less from a licensed dealership, you might qualify for a $4,000 federal tax credit applied directly at the point of sale.

Full-Size Pickup Trucks Gas-guzzling trucks are also sitting on dealer lots longer. Used versions of the Ford F-150, Ram 1500, and Chevrolet Silverado are seeing noticeable price cuts. Dealerships are highly motivated to move these large, expensive vehicles before they lose even more value.

Compact Sedans While popular models like the Honda Civic and Toyota Camry hold their value incredibly well, even these reliable commuter cars are cheaper now than they were last year. You can expect to save between $1,000 and $2,000 compared to last year’s pricing on a standard four-door sedan.

The Best Times of Year to Buy a Used Car

Timing your purchase is just as important as choosing the right vehicle. Dealerships operate on strict sales quotas, and you can use these deadlines to your advantage.

End of the Month and End of the Quarter Sales managers receive bonuses for hitting specific volume targets by the end of the month or the end of the financial quarter (March, June, September, and December). If you shop during the last three days of the month, a dealer will be much more likely to accept a lower offer just to add one more sale to their total.

Late December December is historically the best month to buy any vehicle. Dealerships are desperate to clear out older inventory before the new year officially begins. A car that is three years old in December will technically be viewed as four years old in January, which drops its book value. Dealers will aggressively cut prices during the week between Christmas and New Year’s Day to avoid holding that depreciated inventory.

Holiday Weekends Three-day weekends like Presidents Day, Memorial Day, and Black Friday are excellent times to shop. Dealerships heavily advertise promotional pricing during these weekends. While you will face larger crowds on the lot, you will also find more flexible pricing and special financing incentives.

Beating High Interest Rates

While used car prices are falling, borrowing money is still expensive. According to Experian, the average interest rate for a used car loan is currently hovering around 11.5%. If you are not careful, a high interest rate will completely wipe out the savings you gained from a lower purchase price.

Do not rely on the dealership to find your financing. Before you ever step foot on a car lot, apply for an auto loan through a local credit union. Institutions like PenFed Credit Union, Navy Federal Credit Union, and Consumers Credit Union frequently offer used auto loan rates between 6% and 8% for buyers with excellent credit. Walking into a dealership with a pre-approved check gives you the power of a cash buyer. You can focus entirely on negotiating the lowest possible price for the vehicle without worrying about confusing monthly payment math.

How to Protect Your Investment

Lower prices do not mean you should skip basic precautions. Always demand a Carfax or AutoCheck vehicle history report to verify the car has a clean title and no severe accident history. Furthermore, you should always hire an independent, ASE-certified mechanic to perform a pre-purchase inspection. This service typically costs around $150. A mechanic will check the brakes, suspension, and engine for hidden issues that the dealership might have ignored.

Frequently Asked Questions

Will used car prices return to 2019 levels? It is highly unlikely that average prices will ever drop back to the $19,000 averages seen in 2019. Inflation, higher manufacturing costs for new cars, and advanced technology features have permanently raised the baseline cost of all vehicles.

Are online retailers like Carvana cheaper than local dealerships? Companies like CarMax and Carvana offer a no-haggle, stress-free buying experience, but they are rarely the cheapest option. You pay a premium for the convenience of buying online. You will almost always find a better financial deal by negotiating directly with a local dealership or a private seller.

What is considered a good interest rate for a used car right now? If you have a credit score above 750, a good interest rate for a used car in the current market is between 6.5% and 8%. Buyers with average credit scores (around 650) should expect rates closer to 12% or 13%.