May 18, 2023 - Economy

Cheap used vehicles disappearing: Cars under $20,000 harder to find

Data: Edmunds; Chart: Axios Visuals
Data: Edmunds; Chart: Axios Visuals

First, the under-$20,000 new car died — now, the under-$20,000 used vehicle is disappearing.

Why it matters: Affordable transportation is essential to a healthy, equitable economy.

By the numbers: 30.6% of used vehicles were sold for less than $20,000 in the first quarter, down from 60.5% in the first quarter of 2018, according to car-research site Edmunds.

  • Even the average 7-year-old vehicle with 75,000 miles still sells for more than $20,000.
  • "It's earth-shattering stuff to see that your 20K's not going a long way anymore," Edmunds analyst Ivan Drury tells Axios.

Between the lines: More-expensive new vehicles translates into more-expensive used vehicles.

  • And less than 1% of new vehicles were sold for less than $20,000 in the first quarter of 2023, according to Edmunds.

Zoom in: The pandemic supercharged new-vehicle prices as supply chain bottlenecks cratered production while demand spiked.

  • Meanwhile, cheap passenger cars have fallen out of favor as SUVs and pickups — which are more expensive for consumers and more profitable for auto companies — have become more popular.

Worth noting: Used car prices surged 4.5% from March to April, according to the latest Consumer Price Index figures, and were "the main driver of core goods inflation," Bank of America economist Michael Gapen wrote in a research note.

Yes, but: Other signs point to prices finally coming down a little.

  • The average used vehicle price in the first quarter was $28,381, down 6.4% from a year earlier, according to Edmunds.
  • And Cox Automotive reported that its Manheim Used Vehicle Value Index fell 2.1% from March to April, suggesting that "the used-vehicle momentum enjoyed by the market ... is coming to an end."
  • Drury said one reason for the temporary uptick in April was likely because dealers capitalized on the influx of tax refunds for consumers.

The good news: Vehicles are lasting longer than ever, so your money goes further.

  • The average age of light vehicles on the road in the U.S. is now at an all-time high of 12.5 years, S&P Global Mobility reported.
  • "100,000 miles isn't 100,000 miles from yesteryear," Drury says. "There isn't a cliff that they hit."

The bottom line: There are signs that used car prices are cooling off, but finding one for $20,000 is not exactly easy.

Disclosure: Cox Automotive parent Cox Enterprises owns Axios.

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