Used Vehicle Sales Surge Amid Affordability Challenges

Used cars could get more expensive, too

The used-car market saw a significant boost in February, with retail sales jumping 16% compared to January, according to data from Cox Automotive. This marks the largest month-over-month increase in recent years, driven in part by higher-than-usual tax refunds. However, affordability concerns are also playing a major role, as lower-priced vehicles remain scarce. As a result, used-vehicle inventory levels have tightened, creating a more competitive landscape for buyers.

Inventory shrinks as demand rises

As of early March, total used-vehicle inventory at dealerships stood at 2.18 million units, down from 2.23 million units in February and 1% lower than the same time last year. The days’ supply of used vehicles — a measure of how long current inventory would last at the current sales rate — dropped to 42 days, down eight days from February and three days lower than last year.

The decline in supply is particularly pronounced at the lower end of the market. Vehicles priced under $15,000 now have only a 30-day supply, significantly lower than the industry average of 42 days and 12 days lower than 2019 levels. This tightening in affordable vehicle options reflects ongoing affordability challenges for consumers as demand for budget-friendly cars continues to outstrip supply. Many consumers who rely on lower-priced vehicles are finding fewer options, forcing them to either stretch their budgets or delay purchases.

Prices hold steady despite declining trend

Despite the increased demand, the average used-vehicle listing price remains below year-ago levels. At the start of March, the average price was $25,006, slightly lower than January’s $25,146 and down 1% year-over-year. While used-vehicle prices have been consistently lower than previous years for the past three years, they are now closer to last year’s levels than at any point since 2023.

Interestingly, the top five best-selling used vehicles in February had an average price of $23,531 — about 6% lower than the overall market average. Ford, Chevrolet, Toyota, Honda, and Nissan continue to dominate the used-car space, accounting for 51% of all sales. However, affordability remains a challenge, as even vehicles in this range may be out of reach for some buyers facing high interest rates and limited financing options.

Certified pre-owned market sees modest growth

Certified pre-owned (CPO) vehicles, which typically come with extended warranties and undergo rigorous inspections, saw a modest increase in February. CPO sales reached 203,663 units, up slightly from January’s 203,071 but down 3.4% compared to last year.

While CPO sales are not growing at the same pace as overall used-vehicle sales, they remain a popular option for buyers seeking additional peace of mind in their used-car purchases.

Final thoughts

As tax refunds continue to hit consumers’ bank accounts, used-vehicle demand is expected to remain strong through March. However, with supply already constrained — especially at lower price points — buyers may find themselves facing increased competition for affordable options. While overall prices are lower than last year, market conditions suggest that well-priced used cars will move quickly.

For those in the market for a used vehicle, acting fast and expanding search criteria beyond the most popular brands may improve the chances of securing a good deal in this tightening market.