As buying used becomes the “New Normal,” used car prices are receiving more scrutiny than ever before. Although the year began with declines in the average used car price, the trend quickly shifted.
According to the CarGurus Used Car Price Index, which tracks millions of used car prices, prices drifted down from December to February. On December 1, the index indicated an average used price of $27,534, which fell to $27,171 on January 1 and $26,920 on February 1 before reaching its lowest point, $26,910, later in February. Then it began to rise, to $26,956 on March 1; $27,217 on April 1; and $27,718 on May 1 – a jump of about $500 in just one month.
While the CarGurus Used Car Price Index indicated an average used car price of $27,171 at the beginning of the year, it stood at $27,895 as of June 2. In other words, CarGurus’ data suggests that used car prices have risen by $724, or approximately 2.6% overall, since the start of the year. Therefore, used car prices have rebounded not only to recover from early losses at the beginning of the year but may maintain an upward trend into the summer months, making it hard to expect used car prices to get any better in 2025.
Price increases affecting vehicles at both ends of the price spectrum
One reason for the rising prices of used cars is the ripple effect of supply chain shortages. The U.S. auto industry saw production drop from 17 million vehicles in 2019 to fewer than 14 million in 2022. As a result, there are only an estimated 2 million three-year-old vehicles available this year, about half of the typical supply. To make matters worse, a decline in vehicle leases in 2022 and 2023 leads to fewer vehicles coming off leases in 2025, which reduces the supply of vehicles entering the used market, a key factor in the escalating price of late-model used vehicles.
The first quarter of 2025 marked the first time since 2023 that the average sales price of a 3-year-old used car exceeded $30,000. A narrowing price difference between the average transaction price of a new vehicle and a 3-year-old used vehicle is another indicator of increasing used car prices. For instance, in the fourth quarter of 2023, the average price difference was $19,300; by the second quarter of 2024, it had decreased to $17,700, and in the first quarter of 2025, it dropped further to $16,900.
On the more affordable end of the spectrum, buyers also face an uphill battle. With late-model vehicles in short supply and overall used car prices rising, it has become particularly challenging to find used vehicles priced under $15,000. According to Cox Automotive, dealers only have a 32-day supply of these models, down from a 38-day supply a year ago and an industry average of 42 days.
Continued market volatility
Although sales of used cars are slowing, the supply of used vehicles remains low. Another indicator of used car prices is the wholesale price dealers pay for vehicles at auction. In April, Kelley Blue Book reports, dealers paid 4.9% more for vehicles than they did a year ago. For luxury cars, they spent nearly 6% more than last year. Their bullish behavior suggests confidence in the used car market moving forward, likely indicating that increases in used car prices will continue.
Still, experts agree that predicting resale values has become increasingly challenging, as actual resale values often significantly exceed projected values. Per Edmunds, the average difference between actual and projected values has decreased from a high of $10,353 in the first quarter of 2022 to $5,392 in the first quarter of 2025. However, on average, used vehicles are selling for much higher prices than expected.
Thus, it’s hard to say what’s in store for the rest of 2025. Fortunately, we’re still not at the used car price peaks of July 2022, when the Car Gurus Index average used car price reached $32,216. However, new tariffs potentially adding up to $15,000 per new vehicle, along with the general unpredictability of the tariff situation, could send used prices soaring if more buyers are priced out of the new market.
