Used car buyers may be in for a very expensive surprise | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

With average new car prices still topping close to $49,000, some buyers are turning to the used market to get themselves into their shiny, like-new set of wheels for a more reasonable price.

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However, conditions brought on by the COVID-19 pandemic have caused a ripple effect in the auto industry that buyers still feel, especially in the pocketbooks of buyers looking for a good deal on a new-to-them set of wheels.

A CarMax salesman shows a used Tesla Model Y to a customer at a dealership in Fremont, California, US

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A lot of demand for little used car supply

According to a new report from car buying experts Edmunds, conditions brought on by the pandemic have restricted the supply of like-new used cars and kept prices relatively high.

In essence, this is caused by fewer used cars hitting the used market because fewer new cars were bought or leased three years ago, right at the tip of the COVID-19 chip shortage. According to Edmunds, 2022 had one of the lowest new-car sales volume years since 2011, with only 13.8 million sales.

As a result, in the final quarter of 2024, the price of 3-year-old used cars shot up 3.3% year-over-year from the same period a year earlier.

In the used car industry, three-year-old cars are considered the gold standard, and for good reason. Compared to 2025 models, 2022 iterations of certain cars feature many of the same features but typically cost a lot less than the new ones.

“Three-year-old used vehicles are the cornerstone of the used car market: They are typically the most desired, generally still offer some form of factory warranty, and represent a good value for those uninterested in spending new-car money,” Edmunds said.

More Automotive:

If you have ever watched a car commercial that urged you to visit our local automaker’s dealer for that killer $199/month around certain American federal holidays, you would know that the typical car lease lasts 36 months or three years.

Typically, leases require the tenant to keep the car under a certain mileage (typically 10-12,000 miles per year, or else face a contractually obligated fee) and take good care of it during the lease term.

Leases usually create a healthy cycle of rinse-and-repeat, where a stream of leasees feeds the used car market with barely broken-in cars. But with production constraints during the pandemic, automakers and dealers weren’t incentivized to lease at all.

Edmunds projects that new car sales will improve in 2025, assuming nothing negative affects the car industry. However, while more new car sales typically lead to more people trading in their cars, these cars tend to be much older, which makes the pool of available used cars lean much older than three years.

Edmunds states, “the trade-ins coming in as part of used vehicle purchases have climbed to an average age of 9 years, in line with prepandemic trends.”

A new opportunity for new car market for used car buyers.

Edmunds notes that while car buyers who hoped the current car market resembled the pre-COVID era have seen differing results, they are seeing the opposite end of the pandemic’s rubber band effect.

However, there is good news for those willing to trade up for a new car. New data from Cox Automotive shows that the average price of a new vehicle in the U.S. dipped 2.2% in January 2025, settling at $48,641, compared to $49,738 in December 2024.

Although the figure represents a 1.3% year-over-year increase from the $48,031 figure last year, the January data is a significant break in a trend that saw prices increase for four consecutive months.

“Lower prices, combined with higher incomes, more than offset lower incentives and a slight increase in interest rates during January,” Jonathan Smoke, chief economist at Cox Automotive, said in a statement.