Used car prices hit 3-year high as supply vanishes

Your old car is worth more today than it was a few months ago, but don’t celebrate yet. The cost of buying another one is climbing even faster. In March, the Manheim Used Vehicle Value Index jumped 6.2% from last year. This is the highest we have seen prices since the summer of 2023.

The Tax Refund Spike
Dealers knew you were getting your tax check. They bought up cars early, betting on big demand. Jeremy Robb, a top economist at Cox Automotive, says, “the way this tax-refund season is unfolding, it could continue for a bit longer.” This demand, mixed with a very low supply of cars, is keeping the average used vehicle listing price firmly in the mid-$20,000 range.

Why It Matters to Your Wallet
If you need a car under $15,000, you are in trouble. Those cheap rides only have a 31-day supply left on lots. Because new cars are so expensive, everyone is fighting over the same used ones. This pressure means people are taking on huge debt. The average person is now financing nearly $30,000 for a car that someone else already owned.

The Ghost of the Pandemic
We are still feeling the effects of 2021. Back then, car makers built 8 million fewer cars because of parts shortages. Those “missing” cars would have been the used cars we buy today. Since they don’t exist, used retail sales Q1 numbers are staying low while prices stay high. Even automotive trade-in volumes are down because people are holding onto their current cars longer to avoid these high prices.

Resilient or Just Stuck?
While wars and high rates usually scare buyers, Americans are still spending. The economy shows “resiliency,” but for the average driver, it feels more like being squeezed. With monthly payments for used cars now averaging $559, the dream of an “affordable” set of wheels is fading away.

Read also: War in the Middle East threatens to break India’s record car boom