How the 2023 Used-Car Market Has Impacted Trade-In Values
Want to trade in your used car? Discover how the market could impact its value.
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The used-car market has felt like a rollercoaster of pricing peaks and availability dips, and according to data from Edmunds' Used Vehicle Report for the first quarter of 2023, used-car prices are 44% higher than they were five years ago.
With chip shortages and supply chain constraints contributing to new car shortages, many car owners have been presented with the chance to make more money than ever on their trade-in.
Dealers have been seeking higher mileage cars to keep up with demand and are offering more in exchange. So while this is unwelcome news for used-car buyers, it could mean good news for your trade-in.
Used Car Trade-in Values Remain High in 2023
Over the last few years, new vehicle prices have skyrocketed due to chip shortages, supply chain constraints, and inflation. Higher production costs and limited access to parts have caused new vehicle prices to rise 4.2% over the last year, according to J.P. Morgan.
Because buying new vehicles has become so expensive, many car buyers are looking at used cars, which can be more affordable. This increase in new car prices has resulted in two effects for the trade-in market:
- The increase in new-car prices make used cars a potentially more budget-friendly option for buyers. This coupled with reduced depreciation rates makes your trade-in a higher value commodity for a dealership looking to make a sale.
- Fewer overall trade-ins and more trade-ins from late-model owners. More buyers are looking for affordable options, which means many are choosing to sell and buy used vehicles instead of trading in for a new one. This increased demand for trade-ins also means your used car may have positive equity, even if it's a late-model year.
Low-Cost Vehicles Are Scarce
The soaring prices of used cars in 2023 have led to a scarcity of affordable used and new cars. According to Edmunds' market analysis, more than half of the 2018 used-car market was priced at less than $20,000. The number of used vehicles available in 2023 for less than $20,000 is less than 15%. Not only are affordable vehicles hard to find, they are also older and have higher mileage than cars for sale in recent years.
Is Now the Right Time to Trade in Your Used Car?
If you're wondering if now is the right time to trade in your vehicle, the answer isn't simple. Mileage, make, model, and where you trade it in will help determine the actual trade-in value. Ultimately, the demand for your vehicle will vary depending on a dealership's needs.
Keep in mind that, slowly but steadily, used-car trade-in values will likely begin to drop. Even though used-vehicle prices are still at a historical high, during Q1 they dipped 6.4% year over year, according to Edmunds.
There's still time to maximize your trade-in value while used-car prices remain high and demand is strong. Taking the opportunity to see what your car is really worth now may result in a higher return on your trade-in than if you waited for prices to go back up. Try using an online trade-in evaluator, check out local dealerships, inquire about potential offers, and see if there are any new vehicle options that interest you.
