Before 2020, buying a three-year-old vehicle in the U.S. typically cost a little over $22,000. Fast forward to 2025, and that same used car is now selling for more than $31,000 and that might soon seem like a bargain. The sticker shock in the used vehicle market isn’t new, but its staying power is becoming a harsh reality for American consumers. While prices dipped slightly after peaking during the pandemic, they remain significantly above pre-COVID levels. The used car market, like many other sectors, has been fundamentally reshaped by the pandemic and its ripple effects, and experts warn that what we’re seeing now is not just a temporary inflationary spike it’s a new normal.
The roots of the problem trace back to 2020, when pandemic-era shutdowns disrupted global supply chains and slammed the brakes on new car production. Rental car companies, desperate to replenish fleets after selling them off, jumped back into the market alongside consumers eager to own cars for safer, isolated travel. With fewer new vehicles available and intense competition in the used segment, prices exploded. But even as production has slowly resumed, the used market hasn’t recovered. The average transaction price remains thousands above its pre-pandemic level, and data from the Bureau of Labor Statistics shows used car prices have climbed another 6% year over year.
One of the most significant issues is the basic math of vehicle supply. For several years, U.S. auto production stalled at around 13 to 14 million new vehicles annually, compared to 16 to 17 million before the pandemic. While 2025 is expected to mark a return to those higher production levels, the damage has already been done. Millions of new vehicles simply never entered the ecosystem and therefore never became used vehicles three to five years later. As Ivan Drury from Edmunds puts it, there’s now a gaping hole in the used car pipeline that can’t be quickly refilled.
This supply hole has downstream consequences. Fewer people are showing up to dealerships ready to trade in vehicles they purchased two or three years ago. And when they do, those vehicles are often more expensive models that automakers prioritized during the chip shortage top trims, luxury variants, and high-demand SUVs. As Stephanie Brinley of S&P Global notes, manufacturers focused on selling the most profitable vehicles they could build with limited parts. The result? A used market now dominated by higher-end models, with fewer affordable options available.
Leasing trends also played a role. Traditionally, around 30% of new vehicles were leased, creating a steady pipeline of lightly used cars for resale. But in 2022, leasing dropped to just 17% as automakers favored outright sales, which bring in more revenue. Leasing incentives vanished as high-demand cars could sell at or near full price. Since most leases mature in three years, the downturn is now showing up as a shortage of off-lease used vehicles in 2025, compounding the already tight inventory issue.
Even without the pandemic’s influence, long-term structural shifts are reshaping the vehicle market. American consumers are leaning hard into larger and pricier vehicles SUVs, crossovers, and trucks while smaller, budget-friendly models have largely disappeared from production. Entry-level cars like the Ford Focus, Chevy Cruze, and Dodge Dart have been phased out entirely. That’s left a huge segment of consumers, especially those looking for sub-$25,000 options, with little choice but to look to the used market. But when new cars are more expensive across the board, used cars inevitably follow. The cost of a base model that once started at $15,000 is now nudging $30,000, putting further pressure on affordability.
Industry analyst Sam Fiorani from AutoForecast Solutions underscores this point: buyers who would have purchased a new economy vehicle are now flooding the used car segment, driving up demand and prices. It’s a cascading effect. More expensive new cars mean pricier used cars. Fewer new cars being produced or leased means fewer used cars available for sale. And with supply lagging behind demand, consumers are being forced to pay more or stretch their dollars further with older, higher-mileage vehicles.
Tariffs are another looming issue. While they haven’t had a large immediate impact, the anticipation of potential trade restrictions has already influenced both consumer and dealer behavior. Some buyers rushed to purchase cars before tariffs took effect, boosting trade-in activity but also inflating dealer acquisition costs. Kevin Roberts from CarGurus notes that new and used vehicle sales on the platform spiked in the spring and again in late summer, suggesting that tariff news has triggered waves of urgency among buyers.
Automakers, too, are trying to hedge against tariff risks. Brinley points out that while companies have largely absorbed tariff-related costs to avoid raising prices, that strategy is likely unsustainable. Ongoing trade negotiations with Canada, Mexico, the EU, and Japan remain uncertain, and the U.S.-Mexico-Canada trade agreement is up for review in mid-2026. Any disruption in these deals could raise costs and those increases will almost certainly be passed on to consumers in both the new and used car markets.
At the consumer level, demand remains resilient. Nathan Garnett from OfferUp says that despite rising prices on their platform, used cars are still selling at the same pace. People are willing or perhaps forced to pay more because in many parts of the country, having a car isn’t optional. Public transportation isn’t a viable alternative in much of the U.S., and whether it’s getting to work, school, or the grocery store, personal vehicle ownership remains essential.
Ultimately, this means there’s little relief in sight for buyers. Inflation may be cooling across some sectors, but that doesn’t mean prices will go back down. Instead, experts say to expect a new normal one where $20,000 gets you an older, higher-mileage vehicle rather than a late-model car with all the bells and whistles. Bargains may exist, but they’re increasingly rare. Drury’s advice? Adjust your expectations and understand that used car pricing, like many other post-pandemic realities, has permanently shifted.
"You can't make new used cars," Fiorani says. That blunt truth may be the best summary of the road ahead. With constrained supply, persistent demand, rising production costs, and unpredictable trade policy, the used car market is likely to remain tight and expensive for the foreseeable future.
