It used to be common knowledge that a new car depreciates as soon as you drive it off the dealership lot. Thanks to the pandemic, the post-pandemic economic recovery, and resulting supply chain crunches, that’s no longer the case. 

Automakers have cut back on manufacturing new cars, and late-model used cars have instead become one of the country’s hottest big-ticket items. As a result prices for used cars are rising sharply — in some cases higher than for a brand new model of the same vehicle.

We decided to take a look under the hood of what is going on in the market, using data from CarMax, the largest used-car retailer in the U.S. Our analysis shows that the average used car price is now $31,004 as of November, up 43.55% from the average of $21,598 in the same month last year.

The most popular makes of vehicles to put up for sale, based on current CarMax listings data, are Toyota, Nissan, Ford and Chevrolet. 

When we look more closely at pricing trends over time, there are some surprises. While prices of all makes have risen sharply over the past year, some have gone up more significantly than others. Interestingly while Toyota was in the lead for average price out of three popular makes for most of that period, Ford's and Chevrolet's average prices surged ahead of it starting around June of this year.

An interesting subsegment of the CarMax data is information on EVs, which have been increasingly populating U.S. roads over the past few years. The average price of Toyota EVs has been steadily marching upward and the steepest pace among three major automakers since then. The average price of Nissan EVs was higher than that of Ford and Chevrolet for much of the past year, but that changed in April when Nissan EV prices dipped below those other two for a few months.

Used car prices and inflation 

A huge contributing factor to the rise in prices can be the inflation rate, which measures the change in the prices of goods. If inflation is rising, it means that you have to pay more for the same goods. The current annual inflation rate is 6.22% in the U.S., the highest since November 1990.

Even though the inflation rate is highly correlated with the increase in the prices of used cars, it is not enough to explain the 43.55% increase in the prices of used cars. Using the price levels of last year and the inflation rate for this month, we would expect the average price of used cars to be around $22,937, or $21,598 X 1.062.  But in reality, it is much higher at $31,004. 

Typically, used car prices typically do not have much impact on inflation, but given the numbers, many economists suspect that the car market is not only factoring into inflation — it is helping to drive it.

About the Data:

Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.

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