Used Car Prices Finally Starting to Cool Off

Oct 31, 2022

Since the beginning of the COVID pandemic, the used vehicle market has been anything but normal. Inventory dropped precipitously, causing used car prices to hit record highs in 2021. But, finally we have some good news.

Let's look at the current market, Hurricane Ian's potential impact, and how Indiana's used car prices stack up against the rest of the country.

Current Trends

Used car prices have yet to fall consistently; however, we are seeing price growth slowing, which is a good start. According to data from Cox Automotive—the owner of companies such as Kelley Blue Book and Autotrader—the average listing price for a used vehicle at the end of September 2022 was $28,237. This is $173 above the average price for August 2022 and $1,686, or 6%, above the average price from one year ago.

To put this into perspective, the average listing price for a used vehicle in September 2021 was $26,646. This was about 25% higher than the average listing price in September 2020. For further context, August 2020 was the first time the average listing price was above $20,000 – since then prices have gone up another 41%!

What's Causing Price Stabilization?

The two biggest reasons for the recent price stabilization are improving inventory and lack of affordability.

Used car dealers in the U.S. ended September 2022 with 2.46 million cars in stock. This is 10% higher than the inventory numbers from last September. Econ 101 tells us that prices should start to decrease as supply increases.

Inventory for new vehicles is also increasing. New vehicle inventory ended September at its highest level since June 2021. More new car inventory will give potential buyers more options.

Affordability is becoming an increasing concern. With prices increasing at the rate they have over the past few years, it has caused demand to decrease as some buyers leave the market. They are opting to drive their current vehicles longer instead of upgrading.

Going back to Econ 101, the rise in prices should cause less demand, ultimately helping to slow prices. In addition to this, the Federal Reserve (Fed) has been raising interest rates at a historical rate to combat inflation, which indirectly causes interest rates to finance a car to increase. This ultimately makes financing a vehicle more expensive and less affordable.

According to Edmunds—an American online resource for automotive inventory and information—the average interest rate financed for a used vehicle in the third quarter of 2021 was 7.4%. In the third quarter of 2022, the average interest rate was 9.0%! These rates are expected to increase as the Fed raises its benchmark rate.

Let's take a look at how these changes will affect your monthly payment using national averages from Edmunds:

  • 3rd Quarter 2021: If you financed a used vehicle using the average amount financed ($28,969), at the average interest rate of 7.4%, over the average term of 70 months—excluding sales tax or down payment—then your monthly payment would be about $511.

  • 3rd Quarter 2022: If you financed a used vehicle using the average amount financed ($31,366), at the average interest rate of 9.0%, over the average term of 70 months—excluding sales tax or down payment—then your monthly payment would be about $578.

  • Result: This means you are paying about $67 more per month for your used vehicle using 2022's averages compared to 2021's averages. That's over $800 per year!

Hurricane Ian

Hurricane Ian devastated many areas of Florida's Gulf coast at the end of September. The exact damage will take months to sort out. But, according to Mark Friedlander, Florida-based director of corporate communications for the Insurance Information Institute, "We're anticipating more than 300,000 destroyed vehicles from Hurricane Ian."

As Floridians recover from the disaster, they will need to replace their vehicles quickly. Cox Automotive expects about two-thirds of this replacement activity to occur in October and November. Further, due to this increase in short-term demand, they expect about 80% of replacements to come from the used car market.

The good news is that Cox thinks this will only briefly impact national used-vehicle retail sales. They expect to see only a slight increase in average prices in October.

Where does Indiana rank?

I have good news for our Indiana readers! Indiana is ranked the fifth cheapest state for average used car prices, according to Used car prices in Indiana are -6.6% below the national average and -33% below the most expensive state, Alaska. It's important to note that's analysis is only for one-to-five-year-old vehicles.


If you are in the market for a used vehicle, you should feel relieved that prices are starting to cool. It's also good news that Hurricane Ian should only slightly impact the market and for a short period.

However, the Fed raising interest rates will make financing the vehicle more expensive. Typically, the better credit rating you have, the better interest rate you can get. Make sure you know your credit score and shop rates before you buy. And those in Indiana should be pleased that we have it better than the vast majority of other states!

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