Used car prices are cooling, but not evenly across all models

(ISeeCars) – Used car prices are up 16.9 percent over last year as the microchip shortage continues to impact the automotive industry, according to iSeeCars.com’s latest analysis of nearly 2 million used car sales in May. This is down from a 23.9 percent increase in April and marks the fourth straight month of used car price declines.

“While used car prices have seen minor decreases for the fourth consecutive month, prices remain elevated due to lingering supply constraints,” said iSeeCars Executive Analyst Karl Brauer. “We are also seeing a significant increase in demand for used hybrid and electric vehicles as a result of high gas prices, with the cost of electrics increasing by 37.7 percent and hybrid cars increasing by 32.1 percent compared to last year.” 

Although the average used car has significantly increased in price, iSeeCars’s analysis also found some vehicles have lower-than-average increases, making them smarter buys for consumers in the market for a used car. “While these used models are still more expensive than last year, they haven’t been as drastically impacted by price hikes,” said Brauer.

Top 10 Used Cars With the Greatest Price Increases 

The top ten vehicles with the greatest price increases have price changes from 1.9 to 2.8 times the average vehicle’s price increase and are primarily alternative-fuel vehicles. “Small cars have become the only affordable used car option for a growing segment of the population, and their price increases reflect the high demand these otherwise low-demand vehicles have experienced in recent years,” said Brauer. 

The vehicle with the largest price increase is the Hyundai Sonata Hybrid, which had a price increase of 47.8 percent over May 2021. It’s joined by three additional hybrid vehicles, the Toyota Prius Prime plug-in hybrid, the Toyota Prius, and the Toyota Avalon Hybrid. “Hybrid vehicles are in high demand due to soaring gas prices, with the hybrid category as a whole increasing in price by 32.1 percent,” said Brauer. “Hybrid sedans have seen a resurgence in popularity after falling out of favor as consumers previously embraced hybrid SUVs due to their more affordable price and fuel-efficient drivetrains.”

Two electric cars make the list including the Nissan LEAF and the Tesla Model S. “The price increase for the Nissan LEAF, which was once the highest depreciating car on the market, is likely due to the surge in gas prices as well as the heightened desirability for the redesigned 2018 model that offers increased range and is now coming off lease to enter the used car market,” said Brauer. “Meanwhile, demand for used versions of the Model S waned in recent months as consumers embraced the more affordable Model 3 and the Model X SUV. But the long wait times for new versions of the Model S, which include March 2023 at the earliest for the base model, has driven consumers to the used market.”

Two small gasoline cars make the list including the Kia Rio subcompact car and the Fiat 500x subcompact SUV. “The Kia Rio is among the most affordable vehicles on the market, while the Fiat 500x is the most affordable SUV,” said Brauer. “These vehicles, priced at $20,000 and below, are attainable for new drivers and those looking for affordable transportation, even after their large increase in price over the past year.”

Two luxury vehicles on both ends of the luxury car pricing spectrum round out the list: the Mercedes-Benz G-Class and the BMW 3 Series. “The wait time for a new version of the Mercedes-Benz G-Class is over a year, so buyers who want this opulent off-roader are turning to the used car marketplace,” said Brauer. “The BMW 3 Series entry-level small sedan has likely seen a rise in demand because it provides practicality and quality for those looking to purchase a luxury car.”

Used Car Price Increases By Bodytype and Fuel Type

iSeeCars further analyzed used car prices by looking at the price increases in March 2022 compared to March 2021 by body style and fuel type.

The three bodytypes that have the largest price increases are hatchbacks, wagons, and sedans respectively. “Hatchbacks, wagons, and sedans have the lowest average prices among all bodytypes, which further illustrates the heightened demand for affordable transportation,” said Brauer. “Additionally, coupes and trucks were the first segments to see big price increases more than a year ago, so their increase over the past 12 months is smaller relative to other body types while minivans have not seen as big of an increase in demand compared to other segments.

Hybrid and electric vehicles had used car price increases well above the average for all fuel types. “The rapid increase in gas prices over the past few months has led to a surge in demand for hybrid and electric vehicles,” said Brauer.  

Top 10 Used Cars With the Smallest Price Changes 

The top ten vehicles with the smallest price differences over the past year are primarily trucks and sports cars. 

Two American sports cars make the list, including the first-ranked Chevrolet Camaro and the eighth-ranked Ford Mustang. “Sports cars were among the vehicle segments that saw the earliest price increases during the pandemic, so their year-over-year price increases aren’t as dramatic as other vehicle segments because prices for them were already high in May 2021.”

Six pickup trucks make the list, including the second-ranked Ford F-150, the fourth-ranked Nissan Titan XD, the fifth-ranked Toyota Tundra, the sixth-ranked Nissan Titan, the seventh-ranked Honda Ridgeline, and the ninth-ranked Chevrolet Silverado 1500. “The Nissan Titan and its XD heavy-duty-ish model are the slowest-selling trucks in the full-size segment, and the Honda Ridgeline is among the slowest-selling in the compact/midsize truck segment, reflecting low demand in the used vehicle marketplace,” said Brauer. “Conversely, the Ford F-150, Toyota Tundra, and the Chevrolet Silverado 1500 are all popular pickup trucks and reflect the low year-over-year price increases for the pickup truck segment because their prices were already elevated in May 2021.”

The full-size Nissan Armada ranks third. “The Nissan Armada is one of the slowest-selling vehicles in the segment, and the demand for this gas-guzzling vehicle has likely dropped further amid high gas prices,” said Brauer.

The Maserati Levante luxury SUV rounds out the list. “The Maserati Levante is one of the most expensive vehicles in its class, which could explain why its price increase is lower than competitive models,” said Brauer. 

Why Are Used Cars So Expensive? Chip Shortage Explained

The prices of used cars are at record highs because demand is exceeding supply. Microchip suppliers paused production in the beginning of the COVID-19 pandemic to protect workers, and the economic slowdown caused automakers to order fewer computer chips while demand for personal electronic devices increased. As demand for new vehicles recovered, microchip factories became overwhelmed. Automakers were forced to stop new vehicle production due to a supply chain shortage of microchips and semiconductors. As a result of the production disruptions, more car buyers bought used cars due to a scarcity of new cars. There was also increased demand for used cars when many consumers moved away from cities and required personal vehicles as people abandoned public transportation during the pandemic. The heightened demand was coupled with reduced supply at dealerships as less people were trading in their old cars, leading to a shortage of used cars. The resulting shortage has caused record high prices for used cars. 

And it’s not just used cars that are experiencing price hikes. New car prices have risen too, with the average brand new car transacting above sticker price. Car companies have also slashed incentives due to the shortage of new cars, which has elevated the average price paid for new cars and caused buyers to pay over MSRP. Moreover, the Russia/Ukraine conflict is expected to further elevate new vehicle prices as Russia is a key supplier of nickel, palladium, and aluminum, all of which are required for vehicle production.

“While consumers were previously advised to wait to purchase a used car if they were able to do so, new geopolitical factors are expected to exacerbate and prolong the present used car price increases,” said Brauer. “The best way for American consumers to avoid significantly higher prices while car shopping for the foreseeable future is to either maintain their current vehicle or purchase a used vehicle that isn’t in high demand, and to be as flexible as possible with factors such as color and trim.”

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Methodology

iSeeCars.com analyzed nearly 2 million 1-5-year-old used car sales in May 2021 and 2022. The average listing prices of each car model were compared between the two time periods, and the differences were expressed as both a percentage difference from the 2021 price as well as a dollar difference. Heavy-duty vehicles, low-volume vehicles, vehicles discontinued as of the 2022 model year, and vehicles with fewer than 4 of the 5 model years for each period were excluded from further analysis.

About iSeeCars.com

iSeeCars.com is a car search engine that helps shoppers find the best car deals by providing key insights and valuable resources, like the iSeeCars free VIN check reports and Best Cars rankings. iSeeCars.com has saved users over $332 million so far by applying big data analytics powered by over 25 billion (and growing) data points and using proprietary algorithms to objectively analyze, score and rank millions of new cars and used cars.

This article, Used Car Prices Fall in May, originally appeared on iSeeCars.com.