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Experts expect supply to increase in the used car market this year, but consumers probably won’t find much comfort in pricing.
Dealer inventories continue to improve gradually, but the combination of high-priced cars on the used car market and wholesale prices that rose in January could limit the amount of additional supply that translates into cheaper cars.
According to the Consumer Price Index, used car prices in January fell by 1.8% compared to December, and by 2% compared to the same month last year, but they are slowing down from their record highs. According to J.D. Power, the average price of a used car eight years ago will be $30,202 in 2025, up 27.6% from $23,668 in 2020.
“It’s even harder to find an affordable car under $20,000,” said J.D. Power vice president Jonathan Banks.
This situation is likely to continue even if inventories improve. “We’re going to see a much richer mix of vehicles,” Banks said. “That’s just the reality.”
According to J.D. Power, the share of cars priced under $20,000 will increase from 53% in 2019 to 30% in 2025.
Consumers have been driving cars for a long time, so today’s price hikes may come as a bit of a shock to them, Banks said.
“People who haven’t been to the market for a long time are going to come to the market,” he said.
Used car financing is a problem
Although used car prices have fallen, they remain high due to a lack of affordability for a wide range of households. Many consumers already struggle to maintain the high costs of everyday life, such as housing, groceries, and insurance premiums.
Compared to the average price paid for a new car of $49,191, according to Kelley Blue Book, the used car market may be a more desirable option.
However, the cost of financing a used car is also a problem. Interest rates are generally higher than those applicable to new car loans and can be particularly expensive for consumers with bad credit.
According to Experian, the average interest rate on used car loans in Q3 2025 was 19% for credit scores between 501 and 600. This compares to an average of 7.43% for consumers with scores between 781 and 850.
The average loan amount for a used car in January was $29,364, with an average interest rate of 10.5%, Edmunds said.
According to Bankrate’s auto loan calculator, if that amount were financed at that rate over 72 months (69.7 months being the average), your monthly payments would be $551 and the interest paid over the life of the loan would be $10,339. That would bring the total amount owed on the car to $39,703.
Separately, a small but growing percentage of consumers are taking out used-car loans with monthly payments of $1,000 or more, Edmunds said. In the last quarter of 2025, 6.3% of buyers committed to pay that amount, compared to 6.1% in the third quarter of 2024 and 5.4% in the fourth quarter.
Inventory is increasing, discounts may be available
The variety of used cars available reflects purchases in the new car market over time. Consumers have long preferred SUVs and trucks over sedans. Last year, sedans accounted for just 17% of the new car market, according to Edmunds. In 2015, its share was over 40%.
Ivan Drury, director of insights at Edmunds, said more vehicles are coming off three-year leases this year compared to last year, as the number of leases in 2023 was higher than in 2022. Additionally, rental vehicles and other fleet vehicles are expected to enter the used car market this year as supply continues to recover from pandemic-era disruptions.
As automakers increase the number of new car deals, used car buyers could benefit as well, Drury said. “Once you start seeing discounts on new cars, that trickles down to used cars,” he says.
If it’s been a while since you bought a car, brush up on the best strategies for buying a used car.
“Do your due diligence,” Banks said. Some strategies he recommends:
Check out our certified pre-owned vehicles. “You might be able to get a late model car with low miles and a warranty,” he said. Trust your dealer and make sure you’ve vetted the car you want to buy, he said. You can check your car’s history on sites like Carfax and AutoCheck for a fee of about $10 to $45. Find out what your trade-in is worth and shop around. “As a consumer, take advantage of the availability of data,” Banks said.
