With a year of record price increases and crazy used car values now in the rearview mirror, the question on most dealers’ lips is ‘what’s going to happen to used car prices in 2022?’.
While the next 12 months are unlikely to be as groundbreaking as 2021, experts have told Car Dealer that 2022 will still be a strong year for second-hand motors with fluctuating prices and high demand from consumers.
The shortage of semiconductors and motorists proving to be stubborn to swap their car keys for public transport are two big factors – the former, some say, will only show signs of improvement this summer, but more likely in 2023.
- ‘Crazy’ used car market to feature in ITV current affairs programme
In December 2021, Cap HPI and Auto Trader told Car Dealer (in videos which you can watch below) a softening of prices in November and December was purely traditional seasonal behaviour.
Cap HPI’s Derren Martin, for instance, said this slight dip in values was sharply set against a market that had seen rises of over 27 per cent since the beginning of January 2021.
But will this dip continue on a downward direction or will prices pick up? Is there a price crash on the horizon and will 2022 be a successful one for the motor trade?
We asked seven experts for their views – here’s what they had to say…
New normal will focus on margins and profit
This year, Cox Automotive believes that the market will not return to pre-Covid norms.
The ‘new normal’ for retailers in 2022 is likely to focus on margin retention and profit rather than chasing volume, which is currently unavailable.
Dealers are enjoying strong demand, but they are also less likely to offer discounts because demand looks likely to outstrip supply of vehicles for some time.
There is little chance of an abundance of new stock for two reasons: it will be around 2023 when the raw material and semiconductor shortages correct themselves, and the types of vehicles entering the wholesale sector are not the same as those in pre-pandemic times.
Prices are unlikely to rise at a similar rate to 2021 or fall, as signs of the supply-demand imbalance remain. Businesses will continue to demonstrate the financial health of a market with supply constraints, healthy demand and new car order banks.
Philip Nothard, insight and strategy director, Cox Automotive
Price correction? Yes – but don’t expect anything dramatic
While it seems certain there will be a correction to soaring used car prices in time, it feels unlikely any drop will arrive suddenly or dramatically, and even then it is only likely to happen when supply opens up, which won’t be this year.
We’re entering the third year now of massively restricted new car sales, meaning that supply of used vehicles will continue to be strangled. Used demand will remain strong – fuelled again by buyers eager to avoid public transport, plus new car buyers unwilling to wait for their next car, or simply unable to buy one in a timeframe that suits them.
This is now a long-term trend that will take time to correct itself – probably as long as it runs for and certainly years rather than months to finally fall back into any kind of status quo as we knew it pre-pandemic.
Jim Holder, editorial director, What Car?
Bursting bubble isn’t on the horizon
2021 was a remarkable year for the automotive industry. Used vehicle pricing saw double-digit growth and used cars flew off the forecourts in record time.
And the UK’s used car market looks set for a strong 2022, as it builds on the gains made in 2021. According to our latest data, the average price of used cars is now over £20,169 for the first week of January 2022, up 28 per cent YoY on a like-for-like basis.
It just shows that despite ongoing restrictions, our sector has remained resilient in the face of significant challenges and is on track for strong continued price growth well into the second half of the new year.
The two main factors fuelling this growth are continued new and used car supply constraints and strong consumer demand for cars, both of which show no signs of easing anytime soon.
In fact, a recent consumer poll we conducted showed that 33 per cent agreed that car ownership is now more important than it was prior to the pandemic. Therefore, claims of an imminent ‘bubble burst’ are failing to take these key dynamics into account.
Richard Walker, director of data and insights, Auto Trader
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Strong prices in 2022 – next year market will soften
After dealers reported a quiet Covid used car Christmas our first auction of the year generated a conversion rate of 85 per cent and saw a strong demand, although prices weren’t quite as hot as they had been in Q3 and early Q4 2021.
During 2022 the entire market will hinge on the dynamics of supply and demand. With no new signs of major sources of stock coming into the market dealers will have to compete against one another to buy the stock that is available which keeps prices strong.
Dealers have to keep reviewing their stock and decide whether to stick with what they have on their forecourt or twist and compete for fresh stock at the current prices.
The latter approach looks to be the most progressive option and buyers are becoming more confident to bid more money for cars as consumers understand they are in short supply and are more expensive as a result.
The current market will continue throughout 2022 we believe. 2023 is likely to see used car supplies increase and prices start to gently soften which is where dealers want to be more cautious to avoid stock owing them money.
Alex Wright, managing director, Shoreham Vehicle Auctions
Demand will remain high
The year has started on a positive note with buyer activity noticeably busy across eBay Motors Group’s platforms, with many of our dealer partners benefitting from robust enquiry levels since the traditional Boxing Day bounce in online searches.
Following the prime minister announcing his decision not to step up the current Covid restrictions, in-market buyers can now focus their attention on researching and purchasing their next car. And with ongoing supply problems in the new car market, this means demand for used cars will remain high.
Trade values are still tracking at record levels and many of the large dealer groups going into January stocked up, we can expect used car pricing to remain stable at the current levels for some time to come.
Phill Jones, head of eBay Motors Group
Used cars will get older
Many car makers are saying that it will be Q3 2022 before they are likely to see production back to 100 per cent of what it was previously and even then, they will have to fulfil the existing order book.
In the UK alone finance houses and leasing companies have tens of thousands of new cars in their order banks and it may take a few more months before those new cars arrive and the used cars move back into the used markets.
With an uplifted number of used cars coming off finance another year older due to contract extensions, or simply three months older due to the payment holidays consumers were offered in 2021, we see the average age of many used cars in the market continuing to rise in the coming year.
January is likely to be a strong used market, but we don’t anticipate the uplift in prices to be as high as the usual start to the year, simply because the average used car is already worth 40 per cent more than it was in January 2021.
However, demand and prices are likely to remain high during 2022 and will only start to soften if volumes get to the stage of supply exceeding demand.
We believe that this may well be felt into 2023 and in the meantime, vendors will continue to innovate to best represent their white label partners and manage their own risks in a market which continues to prosper.
Martin Potter, managing director, Aston Barclay
- Used electric cars selling faster than petrols for the very first time
Some popular used cars may hold their value for longer than normal
Used cars saw some extraordinary price growth last year, with demand for some models so strong that they even appreciated with age. A five-year-old Mini Hatch, for example, ended up costing 15 per cent more in 2021 than a three-year-old one did in 2019.
This upward trend cannot continue forever, and prices are likely to stabilise in the coming months.
During the second half of 2021, severe shortages of components constrained the production of new cars – leading thousands of would-be buyers to focus their attention on the second-hand market instead.
The surge in demand for used vehicles has been a key driver of the rising prices of second-hand cars. When that demand cools, the pace of price rises is likely to settle too.
This doesn’t mean used prices will fall across the board though. Dealers will have to contend with some stock shortages for a while, as with fewer new cars being sold in 2020 and 2021, there will also be fewer nearly-new vehicles entering the second-hand market in 2022.
Some of the more recent models may therefore hold their value for longer than they would normally, particularly the most popular ones.
James Fairclough, CEO, AA Cars
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FAQs
Will the price of used cars go down in 2022? ›
Automotive analysts from J.P. Morgan 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.
Is the used car market going to crash soon? ›Used car prices have likely peaked, but new car prices are set to remain elevated through end-2022. In 2023, prices are expected to decline by 2.5% to 5% for new cars and by 10% to 20% for used cars.
Are used car prices expected to decline? ›Used vehicle prices are expected to come down further this year amid rising interest rates and improved availability of new cars and trucks, according to Cox Automotive. The firm expects wholesale used vehicle prices to end the year down 4.3% from December 2022.
Is 2022 a good year to buy a used car? ›While soaring used car prices are bad for those who can't afford a new car, they may mean 2022 is a good time to buy a car for those with a vehicle to trade in.
Should I buy a car now or wait until 2023? ›Americans planning to shop for a new car in 2023 might find slightly better prices than during the past two years, though auto industry analysts say it is likely better to wait until the fall. Since mid-2021, car buyers have been frustrated by rising prices, skimpy selection and long waits for deliveries.
Will used car prices go down any time soon? ›Based on recent industry data, the prices that car dealers pay wholesale for used cars dropped 14.9% during 2022, which means consumers should also start seeing lower prices on the lot. Money expert Clark Howard also predicts the conditions will continue to improve gradually each month throughout 2023.
How long until the used car market goes back to normal? ›The Jerry study found that the used car market will not return to pre-pandemic levels anytime soon. In 2019, there were 13.1 million used cars on the market. That dropped to 11.6 million in 2020 and hit a low of 9.5 million in 2022.
Are used car prices beginning to drop? ›Today's average used car price is about the same as the average new car price as recently as 2010. While the prices of late model used cars are down only 5% off their peak according according to Edmunds, the price of older used cars, those five years or older, have fallen 15% or more from their peaks early in 2022.
Why is now not a good time to buy a used car? ›Buying a car continues to be a challenge amid record-high inflation, support shortages and increasing interest rates. Since the beginning of the Covid-19 pandemic, new and used car prices have risen dramatically, leaving buyers with limited choices for finding affordable vehicles.
Will used car prices drop in 2023? ›But while used-vehicle sales are expected to drop again this year, dealers and used-vehicle experts don't expect the hit to consumer demand and profits will be severe in early 2023. Shoring up that viewpoint: Wholesale used-vehicle prices are down significantly from last year's record highs, but they have not crashed.
Will cars get cheaper in 2023? ›
Expert Advice: With Rates So High, Is a High-Yield Savings Account a Better Bet Than the Stock Market? There is good news on the horizon in 2023, however. J.P. Morgan estimates that prices for both new and used vehicles are set to decrease as supply chain issues abate and inflation is poised to keep easing.
Which brand of vehicle is the most reliable? ›Toyota Prius
Toyota's long-running hybrid car tops the Consumer Reports list for reliability. The Prius is powered by a 1.8-liter four-cylinder with an electric motor that's good for a combined 121 horsepower.
- Lexus GX.
- Kia Niro EV.
- Toyota Prius Prime.
- Toyota Prius.
- Cadillac XT5.
- Mazda MX-5 Miata.
- Honda Insight.
- Toyota Highlander.
Experts at Consumer Reports say that the final months of the calendar year, usually from October to December, are the best times to buy a car.
What is the best month to buy a car 2022? ›You can also get a good deal by purchasing a new car toward the end of its model year, for example, a 2022 model in December of 2022. Traditionally, new model year vehicles start to come out in the fall of the previous year.
Will used car prices continue to rise in 2023? ›The good news for consumers is that used car prices are declining and experts expect the trend to continue in 2023. Unfortunately, the drop won't come close to wiping out the massive surge in values that stretched from the spring of 2020 to the beginning of last year.
Will it be good to buy a car in 2023? ›There is good news on the horizon in 2023, however. J.P. Morgan estimates that prices for both new and used vehicles are set to decrease as supply chain issues abate and inflation is poised to keep easing. Per the financial firm, new vehicle prices are slated to go down 2.5-5% while used cars may go down by 10-20%.
What is the best month to buy a new or used car? ›Best months to buy a car
According to iSeeCars.com, January and February are typically months with the most discounts available, while data from Edmunds.com ranks January and February among the months with the smallest discounts.
As new-car inventory begins to stabilize, J.D. Power forecasts that used-vehicle values will begin their descent to more normal levels by late 2022 and into 2023. “We do expect used prices to cool once new-vehicle production and inventories begin to recover,” Paris said.
Are used car prices expected to stay high? ›Car shoppers have faced sky-high prices for more than a year in part because of high demand and tight inventory. But 2023 may finally bring some relief. As demand stabilizes and inventory improves, prices are expected to ease.
Which car manufacturers are not affected by chip shortage? ›
- 2021 Hyundai Sonata.
- 2021 Jeep Compass.
- 2021 Nissan Titan.
- 2021 Nissan Altima.
- 2021 Ram 1500 Classic.
- 2021 Nissan Sentra.
- 2021 Volvo XC60.
- 2021 Ford Expedition.
- “I'm ready to buy now.” ...
- “I can afford this much per month.” ...
- “Yes, I have a trade-in.” ...
- “I'm only buying the car with cash.” ...
- “I'm not sure…which model do you think I need?” ...
- “Oh, I've wanted one of these all my life.” ...
- “I'll take whatever the popular options are.”
Used Cars Are Finally Getting Cheaper — and Even Lower Prices Are Coming Soon. The good news for consumers is that used car prices are declining and experts expect the trend to continue in 2023.
How much will the car be worth after 5 years? ›After one year, your car will probably be worth about 20% less than what you bought it for. AFTER FIVE YEARS: After that steep first-year dip, that new car will depreciate by 15–25% every year until it hits the five-year mark. So, after five years, that new car will lose around 60% of its value.
What car brand has least problems? ›The report found that Lexus and Toyota make the most reliable cars, while Jeep and Mercedes-Benz make the ones you can depend on least. But those rankings reflect an average of all the cars each manufacturer builds. There can still be variation within any one brand.
What is the #1 most reliable car? ›- 2023 Toyota Corolla Hybrid.
- 2023 Lexus GX.
- 2023 Mini Cooper.
- 2022 Toyota Prius.
- 2022 Mazda MX-5 Miata.
- 2023 Lincoln Corsair.
- 2023 Toyota Corolla.
- 2023 Subaru Crosstrek.
1. Chrysler. Chrysler vehicles are some of the most unreliable on the market. They've been ranked as the least reliable car brand for three years in a row by Consumer Reports.
What brand of car lasts the longest? ›Topping that list is the Toyota Sequoia, which has a potential lifespan of 296,509 miles, according to a new study from iSeeCars.com. The automotive research website analyzed more than 2 million cars to determine which last longest and found that 20 models are able to endure for more than 200,000 miles.
What is the number 1 car brand 2022? ›2022: Top automakers in U.S. car sales
General Motors led all automakers, selling 16.2% of all vehicles sold in the U.S. in 2022. Toyota and Ford were second and third in market share. These are estimates of the final 2022 data and subject to change.
In 2022, Ford led the nation in both total number of recalls and total vehicles affected. Volkswagen Group came in second if you count by the number of recall campaigns (46), but Tesla picked up the silver for number of vehicles recalled (3,769,581).
What is the cheapest month to buy a car? ›
In terms of the best time of the year, October, November and December are safe bets. Car dealerships have sales quotas, which typically break down into yearly, quarterly and monthly sales goals. All three goals begin to come together late in the year.
What car should I not buy in 2022? ›- 1 2022 Mercedes-Benz GLE. Mercedes-Benz.
- 2 2022 Ford Explorer. Via: Ford. ...
- 3 2022 Chrysler 300. Chrysler. ...
- 4 2022 Ford EcoSport. Ford. ...
- 5 2022 Subaru Ascent. Subaru. ...
- 6 2022 Mitsubishi Mirage G4. Mitsubishi. ...
- 7 2022 Lexus GX. Lexus. ...
- 8 2022 Maserati Ghibli. Maserati. ...
According to Kelley Blue Book, the best time of year to buy a car is the end of December, specifically the 30th or 31st. This is because car dealerships would prefer not to move old inventory into the new year when new makes and models are released.
Will car sales decline in 2022? ›New car and truck sales in California fell 10.2 percent in 2022 as supply chain issues and a shaky economy put a damper on customer demand.
Can you negotiate on a used car in 2022? ›If you are in the market for a used car in 2022, you will want to make sure you get the best price. There is often room for negotiation when purchasing a vehicle.
Will car prices go back to normal soon? ›CNN reported that it is likely that prices for new cars will begin to decrease over the next few months due to increasing supply. However, prices are not likely to drop to pre-pandemic levels anytime soon.
What are the projections for auto sales in 2023? ›The January 2023 auto sales pace, or seasonally adjusted annual rate (SAAR), is expected to finish near 15.6 million, a large increase from December's 13.3 million pace, according to a forecast released today by Cox Automotive.
What is a good interest rate for a used car for 72 months? ›The average interest rate for a 72-month new car loan is about 5.4% and 9.2% for a used car loan. It's 5.2% for a 60-month new car loan.
What is the automotive outlook for 2023? ›S&P Global Mobility expects new vehicle sales globally to reach nearly 83.6 million units in 2023, a 5.6% increase from the previous year. In the U.S., the data and consulting firm expects sales will be up by 7%, to about 14.8 million units in 2023.
What is the best time to buy a used car? ›If you're shopping for a used car, the early months of the year — January and February — are a good time to ship. You may see more vehicles on the market then as people sell their old vehicles after buying new ones over the holidays. That increased supply can lower prices, making it a good time to buy.
How much lower than asking price can you offer on a car? ›
Based on your pricing homework, you should have a good idea of how much you're willing to pay. Begin by making an offer that is realistic but 15 to 25 percent lower than this figure. Name your offer and wait until the person you're negotiating with responds.
Do dealerships not negotiate anymore? ›Some dealerships and brands have developed no-haggle pricing. The price on the window is the price of the car, they say. In most cases, you'll still need to negotiate the value of your trade, the cost of financing and the price of any add-ons.
Are dealerships still negotiating? ›The short answer is yes. However, for many, even the thought of negotiating new car prices can seem intimidating. Treat this experience like any negotiation and go in with a plan. The more thought you put into it upfront, the more confidence you'll feel about speaking with your dealer about the price of your new car.