New and used vehicle prices are finally returning to their pre-pandemic levels, largely thanks to rising inventory.
Immediately after the pandemic, a worldwide shortage of superconductor chips forced manufacturers to suspend production of new vehicles. This caused new vehicle availability to plummet, leading to soaring prices as Americans payed major premiums for access to limited inventory. Most other customers were forced to turn to the used car market, leading to increased prices there as well. Many simply checked out of the market entirely.
But production is finally getting back on track, especially now that the United Auto Workers have gotten back to work. According to Cox Automotive, American dealers had 2.61 million new cars, trucks, and SUVs on their lots by the end of January 2024. That’s not as good as the 4 million figure from before the pandemic, but it’s a major step forward from the 1.74 million just a year ago.
Used vehicle prices peaked in April 2022 with an average of $31,095. The price is now down 12% from that figure at $27,297, and down 3% compared to last year. The average new price of a vehicle is down 2.4% from its December 2022 peak, and down 1.2% from last year. It’s significant that prices continue declining, given that historically, they have steadily gone up with inflation.
EVs are taking the brunt of the hit, particularly Tesla models. The average price paid for a new electric vehicle in January 2024 was $55,353, down nearly 11% year over year, according to Kelley Blue Book. This was led by the Tesla Model Y, the bestselling EV, whose price dropped over 20%.
Despite the declining prices, it’s still not a great time for shoppers to get back into the auto market. If you bought a car in 2021 or 2022, the steep depreciation means there’s a good chance you have negative equity, making a trade-in unfavorable. Even if you don’t, interest rates are prohibitively high and vehicle prices are still significantly up compared to their pre-pandemic levels — more than you’d expect from inflation alone. New vehicle prices are currently 21% higher than at the start of 2020, and used vehicle prices are 32% higher.
That being said, even if average transaction prices continue declining, they’ll never get back to where they were. At some point, we must face that this is the new reality.
Kurt Verlin was born in France and lives in the United States. Throughout his life he was always told French was the language of romance, but it was English he fell in love with. He likes cats, music, cars, 30 Rock, Formula 1, and pretending to be a race car driver in simulators; but most of all, he just likes to write about it all. See more articles by Kurt.