The average price of a used car will fall by 15 percent from current levels by the end of 2023, according to a study conducted by Ally Financial.
Ally, which is one of the largest automotive lenders in the United States, expects a “slow unwind,” in used vehicle prices over the next two years or so, Douglas Timmerman, Ally’s Dealer Financial Services president, told Automotive News in a recent interview. In its Q4 earnings report, Ally outlined a predicted 15 percent decline in used vehicle prices between now and 2023 as inventory levels rise and demand returns to normal.
According to a recent analysis conducted by Cox Automotive, the average price of a used vehicle at the end of December sat at just over $28,000 – marking the first time ever that this metric has surpassed the $28,000 mark. This was the second month in a row that the average used vehicle price reached a new record high, with November marking the first time this metric had surpassed the $27,000 mark.
While inventory levels are starting to experience a correction, the number of used vehicles on sale in the U.S. is still 70 percent below pre-pandemic levels, according to Ally Financial. More used vehicles should begin to enter the market as the semiconductor chip shortage wanes, as this will allow automakers to build more new vehicles, which will likely drive more consumers to trade in their used vehicles for a new one.
Experts predict the semiconductor chip shortage will continue to impact vehicle production output for the remainder of 2022, although it should begin to subside in 2023 as chip manufacturers expand their production capacities.
Intel, the largest American semiconductor manufacturer, recently announced a new $20 billion chip fab site in Ohio, which will begin production of much-needed semiconductor products in 2024.