Used car prices are unlikely to hit a ‘cliff’, says JD Power expert

SAN DIEGO – Used car prices hardly crater in the coming months due in part to robust demand for new cars, a JD Power expert said.

A “cliff edge” in used-car prices is unlikely to happen because pent-up demand for new cars equates to more than 4 million vehicle sales likely, said Tyson Jomini, vice president of data and analytics. JD Powerwho spoke Monday at the Used Car Week conference in San Diego.

If automakers could produce vehicles at the level of 2018, they would “clean it up [backlog of sales] pretty quickly” and “return to a more moderate pricing environment,” Jomini said.

Used-car market trackers report wholesale prices peaking in November and December 2021, Jomini said. Prior to that, prices for the average used car ranged from $15,000 to $28,000, he said. Since then, prices have dropped by about $3,000, Jomini said.

But although the wholesale prices have decreased, they have not changed much in difference, he added.

Jomini said one of the reasons he is optimistic that retail used car prices will continue to rise — more so than in 2021, when they continued to rise — is that the number of cars returning to the market remains fairly limited. and it cannot be avoided.

Pandemic-related disruptions have reduced the number of new cars produced and sold each year since 2020. And leasing rates fell sharply.

“Vehicles — there’s a lot less coming back every year, based on other metrics we’ve seen,” Jomini said.

In particular, leased vehicles between one and three years old will be “very hard to find” by 2025, he added.

“Those vehicles are pretty much gone, and the leasing market really isn’t going to come back until we start talking about these other factors, the softening of the pricing environment,” Jomini said.