Car prices have recently been reaching all-time highs due to low inventory and high demand. However, experts are predicting that inventory will stabilize and prices will decline in 2023 for all vehicles, but especially used-vehicles.
In response to widespread production issues and supply shortages, vehicle demand and prices have surged over the past couple years. As a result of such high prices on all cars, there has been essentially no financial benefit to buying a used car over a new one. The only difference was that new cars took much longer to build. However, industry experts are now saying that these price bubbles are beginning to pop in 2023. Estimates say "prices could drop up to 5% for new vehicles and 10% to 20% for used vehicles, according to a report in November from the bank J.P. Morgan" (USA Today).
Although production shutdowns and microchip shortages will likely not be fully eliminated in 2023, analysts still "agree that used-car prices have most likely peaked after climbing 43% from February 2020 to September 2022. As new-car production improves, demand for used-cars will ease up and prices will continue to fall in the new year" (Cars.com). Average prices have already been slowly on the decline and consumers can expect this trend to continue. Up until this point, used-cars and new-cars have been about the same price, but soon there will be a more normal balance as used-cars return to having a lower price tag.
How This Changes The Market
As these changes take place, automotive industry players will need to adapt to the trends once again and dealers may face some growing pains as things revert to pre-pandemic norms. Companies who had high demand and raised prices, are now suddenly losing serious ground as production speeds up and demand softens. According to CNBC, "retail prices for consumers traditionally follow changes in wholesale prices. That’s good news for potential car buyers, however not great for companies... that purchased vehicles at record highs and are now trying to sell them at a profit." Companies selling used cars may have to decide if they wish to drop their prices to match the market and think of long-term success, or if they would rather try to stick with the raised prices and try to sell enough of the vehicles to cover short-term costs.