(iSeeCars) — Everything comes in cycles, and what could justifiably be dubbed “the crazy car price” cycle of the past 2-plus years looks to finally be coming to an end. Used car prices have dropped compared to a year ago for 2 months in a row, marking the first time values have actually decreased year-over-year since June of 2020, over two and a half years ago. 

Summary

• Used car prices fell 2 percent in November, followed by a 3 percent drop in December
• The average used car price was down over $1,000 in December, the first substantial drop in more than 2 years
• Tesla Model 3 was the biggest loser in recent months, sliding nearly 17% since September
• Most electric and hybrid vehicles remain hot, with the Chevrolet Bolt, Nissan Leaf, and Prius Prime prices still up over 20% year-over-year

Everything comes in cycles, and what could justifiably be dubbed “the crazy car price” cycle of the past 2-plus years looks to finally be coming to an end. Used car prices have dropped compared to a year ago for 2 months in a row, marking the first time values have actually decreased year-over-year since June of 2020, over two and a half years ago. 

“We’re still a long way from ‘normal’ but there are clear signs the elevated prices of the past 2-plus years are coming to an end,” said Karl Brauer, Executive Analyst at iSeeCars.com. “It was easy to predict, given the macroeconomic factors we’ve seen over the past 6 months. With everything from inflation to interest rates hitting peak numbers there was no way the upward pressure on car values could continue. The next big question is: how far and how fast will car prices fall?”

Big Changes in Recent Months

Year-over-year Used Car Prices by Month, September – December 2022

Changes in year-over-year differences from nearly 8 percent up in September to 3 percent down just 4 months later confirms a major shift in used car price momentum. Prices were falling every month in 2022, but they did not drop below year-over-year 2021 levels until November, and fell further in December. “Over the next 2-3 months we should get a sense of how far and how fast prices will drop, but the trend is undeniable at this point,” said Brauer.

Used Cars with the Biggest Price Drops, December 2022 vs. September 2022

Looking at prices over the past 4 months offers a more timely view of market activity as used car momentum has shifted. “The pricing shifts since September show which models have taken the biggest hit in recent months, such as the Tesla Model 3 losing nearly 17 percent of its value, and the Nissan Kicks, Ford Mustang, and Hyundai Ioniq Hybrid all down over 10 percent,” said Brauer.

Used Cars with the Biggest Price Increases, December 2022 vs. September 2022

There’s a clear theme in the cars showing recent resistance to the overall market’s price drops. They are all luxury or performance models, suggesting wealthier used car shoppers are still eager and willing to pay for the vehicles they want. 

Prices Have Shifted from Last December

Used Cars with the Biggest Price Drops, December 2022 vs. December 2021

Many of the cars with the biggest drop over the past 12 months were among the hottest models at some point during the pandemic. As noted by Brauer, “Cars like the Chevrolet Camaro, Ford Mustang, Mercedes-Benz G-Class, and Tesla Model 3 were commonly leading the price hikes at the height of pandemic pricing, with people willing to pay whatever it took to get one.”

Used Cars with the Biggest Price Increases, December 2022 vs. December 2021

“The overall used car market is down, but hybrids, electrics, and performance cars remain hot, with the imbalance between supply and demand keeping their prices high,” said Brauer. The Toyota Prius Prime, Nissan Leaf, and Chevrolet Bolt are still up more than 20 percent, with the Porsche 911, Mini Clubman and Volkswagen Golf GTI also showing resilience in a falling market.

Used Car Price Changes by Body Type, December 2022 vs. December 2021

Hatchbacks, coupes, and wagons make up a small faction of the car market, helping demand stay strong relative to their supply. Mainstream segments like sedans, trucks, and SUVs are all down for the year. Two other niche segments, convertibles and minivans, are down the most. Some of these two segments’ price drop is reflective of seasonal demand, as minivans and convertibles are more popular in the spring and summer months for recreational driving.

Used Car Price Changes by Fuel Type, December 2022 vs. December 2021

Hybrid vehicles remain quite popular in the used car market, with prices still above last year’s level. As a stepping stone between traditional gasoline-powered vehicles and pure electric vehicles, hybrids offer substantially better fuel efficiency than conventional models without the high purchase price and range anxiety that come with EVs.

Bottom Line

Overall, used car prices are dropping, which means consumers waiting for prices to come down won’t have to wait much longer. Prices are still above pre-pandemic levels, but every indication suggests they will continue to fall, presenting a likely buying opportunity in the coming months for shoppers who have been waiting on the sidelines for the past 2 years.

Related Studies:

• Inflation Hammers the Car Market, Driving Up Prices and Reducing Affordability
• Best Used Cars for the Money
• Top 10 Cars That Hold Their Value the Best

Methodology

iSeeCars.com analyzed over 1.9 million 1-5-year-old used car sales in December 2021 and 2022. The average listing prices of each car model were compared between the two time periods, and the differences were expressed as 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.