But other supply constraints may be an even bigger factor
of ConsumerAffairsMay 29, 2025
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The average sales price of 3-year-old used vehicles surpassed the $30,000 mark in Q1 2025, narrowing the gap with new car prices to under $17K for the first time since 2022.
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Due to unexpected market swings, 3-year-old lease-return values are coming in higher than automakers originally forecasted offering some drivers unexpected trade-in advantages.
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Tariffs on foreign-assembled vehicles may cause sharp differences in resale values, with impacts varying at the model level rather than uniformly by brand.
The used vehicle market, which had been gliding toward stability after years of turbulence, is facing a new round of pricing pressure in early 2025. A confluence of tightening inventory, older trade-ins and looming tariffs on new vehicles has put a renewed strain on used vehicle pricing, according to recent data from automotive publisher Edmunds.
The first quarter of 2025 began with encouraging signs. New-car inventory had largely recovered from the semiconductor shortages that plagued the early 2020s, and average transaction prices (ATPs) for new cars plateaued as manufacturers began reintroducing modest incentives.
However, the used market tells a different story. A dramatic slowdown in leasing during 2022 and 2023, compounded by fewer overall vehicle sales, has led to a sharp decline in the number of near-new vehicles entering the used market. The average age of trade-ins climbed to 7.6 years in the first quarter of 2025, the oldest since 2019, reflecting the diminishing supply of newer used vehicles. This scarcity is already impacting pricing trends.
The early warning signs
For the first time since mid-2023, the average price of a 3-year-old used car surged past $30,000, hitting $30,522, a 2.3% increase from the same period last year. Alongside higher prices, used vehicles sat on dealer lots for an average of 38 days before sale, four days longer than a year ago and the longest turn rate since early 2021.
Dealers are adapting to the low-supply environment by holding out for higher offers, particularly on near-new models. As a result, the average age of used vehicles listed online jumped from 5.7 years in March 2024 to 6.1 years in March 2025.
A once wide price chasm between new and near-new vehicles is narrowing. The gap between ATPs for new and 3-year-old vehicles fell to $16,970 in the first quarter of 2025, the first time it’s dipped below $17,000 since late 2022. Edmunds said this subtle yet significant shift hints at deeper price volatility to come, especially if new car supplies are again constrained, this time by tariffs.
The tariff impact
Much like the global chip shortage redefined resale value projections in 2022, 2025 may see similar disruptions but this time, fueled by geopolitical policies. Emerging tariffs on foreign-built vehicles are beginning to shape both the new and used markets unevenly. Vehicles originally manufactured in countries like Canada and Japan are seeing resale values significantly outperform initial predictions.
For instance, U.S.-built vehicles had a predicted resale value of $26,719 for 3-year-old models, but actual resale prices have climbed to $33,572, a $6,853 difference. Canadian-built models saw an even larger variance of $7,760. These tariff-induced shifts could offer financial relief to owners trading in vehicles at unexpectedly high values.
Unlike the across-the-board impact of past supply shocks, Edmunds researchers believe tariffs will generate uneven consequences. Vehicles produced in lower volumes or in countries facing steep tariff penalties will likely become scarcer and pricier, pushing demand and prices higher in the lightly used segment.
For consumers, this could mean higher trade-in offers, especially on models built overseas. Edmunds recommends gathering quotes from multiple dealerships, particularly if trading in a vehicle originally leased during the supply-constrained pandemic era.
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