While new vehicle prices continue to rise month after month, used car prices have been declining in 2025. Admittedly, it’s still early in the year but as new car sales keep rising so too do the number of trade-ins, but demand has kept used-car inventory tight which means uncertainty for prices long term.
There are several potential problems looming that could turn the tide, pushing used vehicle prices higher nationally.
However, there are several potential problems looming that could turn the tide, pushing used vehicle prices higher nationally, including the potential for a rate increase by the Federal Reserve as it looks to keep inflation in check, the Trump administration’s threat of 25% tariffs on imports from Canada and Mexico, and more acts of God, such as the California wildfires destroying used car inventory.
In California, prices for used cars are up as the fires destroyed more than 6,300 used vehicles in the Los Angeles area, according to a Carfax report. The primary example being pickup prices were up $400 last month in California, but down $350 nationally.
Current status
Rising interest rates have people paying more for their used vehicles.
Right now, prices have been dropping in 2025 but on a year-over-year basis, they’re higher. Strong demand and a small inventory pool combine with high interest rates to push it up.
The average retail price for model year 2022 vehicles fell by 0.3% in the most recent week, while wholesale prices remained unchanged, Cox Automotive reported. The group noted used vehicle prices are higher compared to year-ago number due to “strong demand and limited supply.”
The market for used vehicles remains competitive because many consumers are now starting to get their tax refunds. This push to use those refunds will keep supply levels tight and keep prices higher. This is despite a rise in interest rates for new and used cars, which now average 9.53% and 14.12% respectively.
“The rise in loan rates is putting upward pressure on monthly payments, affecting affordability for consumers,” Cox officials noted.
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What you’re paying
Nationally in February, several used car segments saw price drops. Cars were down $160, luxury cars fell $150 and pickups slid $350, according to Carfax. However, there were some that rose, such as luxury SUVs ($80), hybrids and EVs ($150) and vans ($300).
Used vehicle sales could exceed 20 million vehicles in 2025, a slight increase over 2024 numbers.
Prices of 3-year-old used vehicles increased by 3.3% year over year to $29,710 on average in Q4 2024, up from $28,772, according to Edmunds. New-vehicle sales continue to rebound, but aren’t’ as strong as the pre-pandemic run. When combined with low lease penetration, which have resulted in the lowest level of 3-year-old lease returns since 2013, used vehicle inventory remains flat or “constricted.”
Edmunds also notes that buyers who sat out in 2024 hoping for better deals in 2025 are going to be disappointed between the aforementioned inventory levels, demand and rising interest rates.
What’s coming
Cox Automotive is forecasting retail used-vehicle sales in 2025 to reach 20.1 million, an increase of approximately 1.2% compared to 2024. Sales growth is expected to remain slower because supply levels are going to remain tight due to the decline of trade-ins hitting the market courtesy of the slower new vehicle sales attributable to the pandemic.
For 2025, Cox Automotive forecasts growth in every sales metric except certified pre-owned sales. CPO sales are anticipated to drop by 1.6% in 2025 to 2.5 million due to fewer lease maturities.
“For used-car shoppers who have held off on a purchase with hopes of a more stable market and stronger discounts, 2025 could prove to be a challenging environment from both selection and pricing perspectives,” Edmunds noted.
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