The pandemic was a boon for few, but car dealers capitalized on there being fewer new vehicles, by spiking prices. It is the old “supply and demand.” People did less, which saves them money for big purchases. And without the ability to purchase new, used car prices swelled. But now it’s 2023 and everything is going backward.

Why aren’t used cars selling now?

Leasing is way down, meaning there aren’t low-mileage cars for a dealership to pluck wholesale. Interest rates are high, and new cars are beginning to reach post-pandemic production for the first time. But they’re much more expensive due to inflation and, well, because automakers can get away with it.

Now we have car buyers with less money to spend. And with fewer cars coming off leases, and new cars viewed as too costly. The result is that car dealers are now looking for clean, older, high-mileage cars as a way to make sales. Obviously, they’re worth less, so they cost less. One dealer told Automotive News, “I normally wouldn’t, but we sold a 2015 Ford F-250 with 80,000 miles on it the other day.” 

For 2022, used cars tanked to their lowest in almost a decade. In all, they were 11% down from 2021. Economists are afraid with high inflation, high interest, and buyers waiting for both to lower, can mean trouble this year. 

How are dealers reacting to slower used car sales?

Automotive News says dealers can only lower what they charge, accept a lower gross profit on sales, and give less for trade-ins. But most say they will ramp up used sales this year. That could be tricky as franchised dealerships report it now takes 42 days, on average, to move a used car. 

Another problem concerning dealers is the trend of lessees keeping their off-lease cars in lieu of a new and much higher lease. Even a $200 or $300 monthly increase for a new lease can be too much to bite off when many more Americans are now living paycheck to paycheck. 

Instead, there are fewer low-mileage off-lease cars showing up at wholesale auctions. Dealers are hoping that this will be temporary because new car production is beginning to get back to normal. When they start being turned in two or three years from now there will, once again, be a higher volume of these desirable cars. 

Will it get better or worse?

But until then, the retail market will continue being soft because dealers aren’t willing to spend more for cars, and demand is dropping off. That, in turn, triggers overall used car depreciation, which dealers must factor into any car landing on their lots. 

The hope is that the inevitable recession, which some think began in October 2022, won’t be severe, and that by the end of the year, new car inventories will be healthy. Combined with potentially lower interest rates to spark up demand, maybe 2023 will end much better than some are predicting.