Will Used Car Prices Drop in 2025?

Used car prices have skyrocketed in recent years due to supply chain disruptions, inventory shortages, and high inflation. For buyers looking for more affordable options, there is an important question looming - will used car prices start to drop in 2025 and beyond?

While it's impossible to predict the future with certainty, analyzing several key market factors provides clues into where used car prices could be headed over the next few years. Here's more about used car pricing from Lomira Auto.

Key Factors That Influence Used Car Pricing Trends

Several core factors have driven the fluctuations in the used vehicle market recently. Here are some of the essential elements that impact pricing:

• New Car Sales - When fewer new cars are produced and sold, it limits the supply of later model used cars down the road. Production shortages in 2020-2021 severely limited new car inventory.
• Used Car Inventory - Basic supply and demand impacts prices. Used car inventory has been extremely tight due to production cuts, leading to increased prices. More cars returning to the used market will help lower prices.
• Inflation - As inflation drives prices up across industries, used car prices also rise. High inflation leads to higher interest rates, making financing more expensive for buyers.
• Gas Prices - Rising gas prices tend to lower demand for larger vehicles and increase interest in hybrids and EVs. This impacts pricing segments differently.
• Economic Factors - Interest rates, employment rates, consumer confidence, and other economic factors shape people's ability to purchase cars. A strong economy supports higher prices.
• Consumer Buying Preferences - Preferences like SUVs over sedans, trucks over cars, and newer used over older used impact individual models.
• Trade-In Values - High used prices lead to higher trade-in values, propping up pricing. Lower used prices mean lower trade values.
• Disposable Income - People's budgets impact what they can afford. Higher disposable income allows more buying power.

Projecting Where Prices Could Be Headed

Taking into account the key factors above, here are some projections on where experts think used car prices could be heading in the coming years:

• New Car Production Will Recover - After significant cuts, analysts expect production will steadily recover over the next couple of years as supply chain issues resolve and inventory rebounds. This will help the used car supply.
• Used Car Inventory Will Replenish - The influx of off-lease vehicles returning to the market, along with fleet replacements, will help increase used inventory over 2022-2024. More options tend to mean lower prices.
• Buying Preferences Remain Strong - Continued SUV and truck popularity should keep these segments strong. The affordable used car market looks robust.

The Outlook for 2025

Given the above trends, analysts suggest used car prices should moderate over the next couple years as supply stabilizes, inflation retreats, and the market finds equilibrium again. Prices are not expected to plunge sharply but rather ease downwards gradually. While the average used car may still cost more than pre-pandemic, experts are optimistic the extreme price spikes of 2021-2022 will subside.

The Bottom Line

The used car market has seen tremendous upheaval since 2020, making projections very fluid. But based on current data, analysts seem cautiously optimistic that supply and demand will rebalance in the coming years, leading to a leveling out of extreme used car price spikes by 2025 and beyond.

As we move forward, Lomira Auto in Lomira, WI will keep a close eye on market and pricing trends. Contact us anytime to learn more about our current used vehicle inventory, pricing, and expert projections for the used car market! Our experienced team is here to help find the right used car at the fairest price to meet your needs, today and down the road.