The used car market is constantly evolving, shaped by various economic factors, new consumer preferences, and industry changes. In 2025, understanding where the market is headed is critical for dealerships. From supply chain recovery to fluctuating depreciation rates, to removing the used EV credit, staying informed is the key to navigating challenges and capitalizing on opportunities.

So, what used car market trends can dealerships expect? Exploring the trends from 2024 and some predictions for 2025 will help you stay ahead of the curve and primed for continued success. 

Used Car Market Trends Observed in 2024

Decreased Prices

A survey released in Q3 of 2024¹ notes that the used car price trends decreased by 6.2% between 2023 and 2024. As such, the average used car price went from $28,960 to $27,117. As CarEdge² noted, this is the largest price drop since the pandemic, enticing buyers already tired of dealing with the difficulties and expenses of buying new. However, prices still haven't fallen to pre-pandemic levels, when the average cost of a used car was approximately $20,618³.

High Interest Rates

Interest rates were notably high in 2024, creating challenges for buyers in the used car market. Average percentage rates (APRs) hovered around 14%², significantly impacting affordability. As a result, financing became a less attractive option for many consumers.

Increased Sales

In the end, used car sales increased in 2024. Since high APRs made financing unappealing, buyers were willing to purchase these cars outright. Not only that, but new-car production levels were also steadily returning to pre-pandemic levels. In turn, more people were trading in or selling their current vehicles, increasing the number of used cars in the marketplace. By Q4 of 2024, buyers were in a better position to make purchases, and dealers were in a better position to turn a profit⁴.

Predictions for the 2025 Used Car Market

Expected Market Growth

Following the presidential election, there is more clarity about the economy's direction in 2025. BusinessWire⁵ suggests inflation and rates will remain stable. 

This is excellent news for the overall economy and particularly the auto market. However, there are still some challenges. New potential tariffs could impact the price of imported cars and auto parts. While economists seem optimistic, concerns about future policy changes remain. On the other hand, this uncertainty might encourage car buyers to act sooner.

Possible Semiconductor Shortages

This past year, we mentioned how an unprecedented shortage of microchips weakened the market. Well, this might happen again⁶. If this shortage occurs, the production of new cars will stagnate. There might also be a ripple effect, with more owners holding onto their vehicles, which means fewer trade-ins entering the used car marketplace. A shortage of new and used cars might increase prices, especially as consumer demand grows.    

Some Inventory Normalization

If inventory levels maintain their current trajectory, they could continue normalizing. Estimated used retail Days-to-Turn is now at 51 days⁷, compared to 61 days last year (2023)⁸. Improving Days-to-Turn stats indicate a balanced vehicle supply as the year continues. Of course, dealers should continue monitoring supply chain developments and preparing for possible changes. 

Prices Remain Steady

Even with some inventory stabilization, the supply of used cars will remain tight, which means prices aren't going to fall significantly. These key issues are due to pandemic disruptions⁹ that saw supply shortages for new vehicles and higher costs, leading many car owners to hang on to what they already own. The lack of trade-ins affects supply for the used vehicle market. Many owners are waiting to trade in, which makes sourcing used cars challenging. The Federal Reserve's high interest rates don't help matters. Many still find it far too expensive to take out a loan for a new car. 

On the other hand, this does create an opportunity. With fewer buyers willing to finance a new vehicle, they're more likely to consider used cars. After all, the average used car will sell for around $27,117, while a new car will likely go for $48,724¹⁰. Used cars are a relative bargain, and more consumers are seeing that. Now, it's up to dealers to keep track of their stock, ensuring they have the vehicles people want, even when supplies are tight.  

New Depreciation Norms

Traditionally, new vehicles depreciate about 20% in their first year and around 60% over the following five years¹¹. Nowadays, things are different. Between 2020 and 2025, there have been supply chain issues, international turmoil, heavy inflation, and high interest rates. All of these events and more have altered buying patterns and consumer behavior. 

With more people turning to the used car market due to high new car prices, depreciation rates for many used vehicles have slowed. This is particularly true for older, budget-friendly models, which will be the most affordable.

However, it's not true across the board. For instance, all 2011 models won't necessarily depreciate less than all 2015 models. Instead, most of a car's depreciation occurs in its first few years, so older cars have already lost most of their value. The primary reason for the demand for older models is their lower upfront cost. They're just more practical for buyers.

While affordability plays a significant role in stabilizing the value of older used cars, factors like reliability, mileage, and supply chain dynamics will also influence depreciation rates. As a result, some older models might hold their value better than expected, but this trend varies widely across different makes and models.

Help Your Dealership Thrive in 2025

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Sources:

1. Drury, I. (29 October 2024). Average Price Gap Between New and Used Vehicles Surpasses $20K for the First Time Ever in Q3. Edmunds. Retrieved January 19, 2025, from, https://www.edmunds.com/car-news/used-car-report-q3-2024.htm 
2. Fischer, J. (23 October 2024). The Used Car Market Is Collapsing in 2024 – What Buyers and Sellers Need to Know. CarEdge. Retrieved January 19, 2025 from, https://caredge.com/guides/used-car-prices-fall-2024
3. Used Vehicle Report 2019. Edmunds. Retrieved January 19, 2025 from,  https://static.ed.edmunds-media.com/unversioned/img/industry-center/insights/2019-used-vehicle-report.pdf
4. (11 December 2024). Optimism on the Rise Among Auto Dealers Following Decisive Election Results, Says Cox Automotive Q4 2024 Dealer Sentiment Index. Cox Automotive. Retrieved February 3, 2025, from, https://www.coxautoinc.com/news/q4-2024-cadsi
5. (16 January 2025). GDP, Inflation, and Rates to Remain Stable in 2025, Investors to Focus on Quality Across Asset Classes. BusinessWire. Retrieved January 19, 2025, from, https://www.businesswire.com/news/home/20250116371850/en/GDP-Inflation-and-Rates-to-Remain-Stable-in-2025-Investors-to-Focus-on-Quality-Across-Asset-Classes
6. (29 August 2024). BriefCASE: Another Semiconductor Shortage May Be Coming. SPGlobal. Retrieved January 19, 2025 from, https://www.spglobal.com/mobility/en/research-analysis/briefcase-another-semiconductor-shortage-may-be-coming.html
7. Fischer, J. (31 January 2025). Used Car Price Trends for 2025 (Updated Weekly). CarEdge. Retrieved February 4, 2025, from, https://caredge.com/guides/used-car-price-trends-for-2025
8. (1 January 2024). Market Insights – 1/3/2024. BlackBook. Retrieved on January 19, 2025, from, https://www.blackbook.com/market-insights/market-insights-1-3-2024/
9. Troy, J. (22 October 2024). Inflation Explained: Pandemic disruptions work their way out of the car industry. TRIB Live. Retrieved February 4, 2025, from, https://triblive.com/local/regional/inflation-explained-pandemic-disruptions-work-their-way-out-of-the-car-industry/ 
10. Salmon, F. (29 December 2024). Don't blame inflation for the price of new cars. Axios. Retrieved January 19, 2025, from,  https://www.axios.com/2024/12/19/cars-prices-inflation-suvs
11. Hardesty, C. (17 December 2024). How to Beat Car Depreciation. KBB. Retrieved on January 19, 2025, from, https://www.kbb.com/car-advice/how-to-beat-car-depreciation