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America can't afford a used car anymore… And it sure feels that way. The average used car listing is $27,239. That's very close to the peak price in the pandemic. Why are we back up at pandemic levels? But, it's not just that prices are going up. Affordable used cars are disappearing. In 2019, more than half of used cars sold for under $20,000. Today it's under a third. Major used car dealerships are collapsing. Car repossessions, are the highest they've been since 2009, after the financial crash. So, why are prices higher? Where did all the cheap cars go? And, why are the oldest, and cheapest cars… the ones rising in price the fastest?
The data is pretty clear, the used car experience, is getting more difficult. In 2019, $10-15K got you a 4-5-year-old car with under 60,000 miles. Today the same money gets an 8.7-year-old car with 98,222 miles. But the pandemic is years behind us now, why are things still so unaffordable? It's not just inflation either, there's a bunch of pieces which have changed which mean we pay more, for older cars. To unpack all this, we need to understand the system of used cars, which is like the marble, in a game of Mouse Trap.
"A new vehicle sale is the marble at the top of the mousetrap game. And when you drop that marble, it's going to go through all the chutes and ladders all the way down to the bottom." Every used car, was at one point, a new car. It will gradually make its way down to the bottom. Dropping in price with age, mileage, and the number of owners. Not every step is the same, and some are more important than others. But, this whole board was shaken up during the pandemic. Specifically, some very important pieces were broken, or removed. One affecting another, affecting another, which led that marble to where we are now. Leading to America being priced out of used cars.
The first of which, most people don't notice, but quietly disrupted the entire game. You might assume most used cars are those bought, and then traded in, but a large chunk of them, especially the "newest" used cars, come from leasing. And this is a hugely important part of the "life cycle" for lack of a better word. A lease, is essentially a 3-year rental, from the automaker themselves. Toyota, Ford, GM, etc. Instead of buying a car, the finance arm of the automaker would lease it to you for about 3 years. You pay for the value the car loses over three years, plus interest. And then at the end, you can buy it out,
or it goes back to the automaker, who can sell a clean, low-mileage, three-year-old used car. People lease, because the monthly payments are noticeably lower than a loan payment. And automakers offered it because, even if it was low monthly payments, it still moved more new cars off lots, and every lease ending three years later brought the driver back to the dealer for another new car. This was the backbone of the used market, because it's how a lot of still reasonably new cars, about 3 years old, moved into the secondhand market. But the pandemic changed things. Before the pandemic, about 30% of new cars were leased.
In 2022 it fell to 18%. Might not sound like much, just 30 down to 18… but it is. It's a 40% drop, and four in ten leases were gone. This meant the cars coming back off lease each year fell from about 5.2 million to 2.4 million. Suddenly there were a lot fewer cars rotating in and out of dealerships. More people buying cars, holding onto them for longer terms, means overall fewer cars on the market. Between 2020 and 2023, we saw the global semiconductor crisis.
The pandemic threw production and supply chains into chaos, and everyone was fighting for chips. So… what does this have to do with cars? New cars, becoming more and more computerized, are all tied to semiconductors, which have been experiencing all kinds of constraints, notably in 2023. And today, it's continuing thanks to AI. You might think "okay, a car has a few chips in it, how can that drive up prices?" Well, not quite. Modern cars don't just have a couple chips. They have thousands. Modern cars typically have between 1,000 and 3,000 chips.
And this constraint had a few important consequences. With limited chips, automakers built their most profitable models first: like trucks, and SUVs. Why waste your constrained supply of chips on the models that aren't as profitable? So fewer cars, and also: less leasing. "The OEMs really leaned into building more profitable vehicles, such as higher trim levels, trucks and SUVs. Those are more expensive and tend to be leased less frequently. Leasing is really expensive for an OEM." People tend to get more mileage out of trucks and SUVs, and leases come with mileage caps,
as well as extra charges for wear and damage. So they are less likely to lease these cars. "the attitude is that demand is strong enough to not sell lower margin base models, and to not spend as much improving the cars year-over-year." And this contributed to something else. Which explains why there are fewer leases, and fewer used cars. That helps explain why prices are even higher now, despite the pandemic being years ago. A huge impact on leasing, is in something called incentive spend, and this shows how much the playing field has changed. Before the pandemic, in 2019 specifically, incentive spend was 11.12%.
This is the amount the automaker spent on selling incentives against the total value of the car, they're trying to sell. Like cashback, cheap financing, subsidized leases, that sort of thing. Like how a bank might give you a small cashback, if you get a mortgage. 2019 was a great time to be buying cars. But after the pandemic, this changed. It reached a low point of just 2% during the shortage in 2022. But then it reached an average of about 6.5%. More, than 2, but way lower than pre-pandemic. So on a car retailing at $50,000, in 2019 you'd get about $5,560 off. Today it's just $3,250 off.
This is a huge issue that I don't think people have realized. Automakers don't have to spend as much effort getting people to buy, and they're selling overall fewer cars and more profitable cars, so they don't have as much need to lease out new cars, so there are way fewer of these cars entering the used market. "The COVID experience showed both automakers and dealers the upsides related to higher margins and reduced sales" So not only are prices still high, their actual price, is even higher, because discounts, are lower. And this shortage rolled downhill, because those three-year-old cars, the "leased" ones, are missing. A three-year-old car averaged a
record $32,461 in Q2 2026. The pandemic peak for that age was $32,164 in Q1 2022. So these three-year-old cars today, are more expensive than at the pandemic peak. And this starts to make more sense, when we look at how long these cycles are. In 2021 and 2022, it was "wave one". Right in the pandemic. There was a huge shortage, so heaps of people went to the used car market, which caused prices to explode. But years later, we're now in "wave two". That drop in leases from 2021 to 2023, is hitting us now, 3 years out. The length of a lease. So those cars that would be arriving now as the main supply of good used cars… aren't!
The problem isn't that prices are rising, or that discounts are dropping, it's the supply. And this delayed effect applies to more than just leasing. About 8 million vehicles that would have been made for U.S. buyers during those years never were, largely due to production shutdowns and supply shortages. 16.2 million cars were sold in 2025, up from the pandemic-era low of 13.8 million in 2022. Forecasts for 2026 are between 15.8 and 16.3 million. But the main thing is that all of this is lower than the record 17.55 million vehicles sold in 2016.
The U.S. auto industry has sold roughly 16 million fewer vehicles than it would have if annual sales had held at the 2016 record of 17.5 million. That is about a year's worth of volume gone - about half of it since the pandemic. But why are older cars rising in price the fastest? Cars 15+ years old rose 13.9% in a year. Cars 5 years old or newer rose 3%. This is extremely odd. Demand for nine- and 10-year-old cars also remains significantly above historical trends. "We do not normally see this kind of pricing pressure at the lower end of the market." And it's all because the shortage rolls downhill. People who would have bought
nearly new now buy older, and people who would have bought older now buy very old. There's more to this though. People are holding onto their cars longer, and the average car on US roads is a record 12.8 years old, so fewer old cars are reaching the secondhand market. With how expensive used cars are, it makes sense people are waiting longer to upgrade. But, on that point, there's something I haven't mentioned yet. All of this, the less supply and higher price for used cars, has impacted something else. Another giant part of the equation has changed as well, on why cars are becoming unaffordable.
With a lot of cheap cars gone, people tend to borrow more, for longer. So most buyers aren't actually paying the sticker price, they're financing it. Which turns out, can be even more. This isn't leasing though. Customers are paying off the entire value of the car, over time, almost like a mortgage. And the figures today are pretty crazy. According to Edmunds in October 2026, there were new record highs across the board. The amount financed for a new vehicle is $44,664, and the average term is 70 months! But more than one in four new-car buyers are now financing vehicles for… wait for it… 84 months, or longer!
And it's not just new cars, and in some respects, used cars are even worse. The average used car financed is $30,703, also at 70 months, except, the average down payment is $3,865, with an APR, annual percentage rate, of 10.6%. New cars have 7%. That means, at $582 a month, across 70 months, a used car will need about $40,970 repaid, on $30,703 borrowed. But, it gets worse. Among used-vehicle buyers, 6.5% took on $1,000-plus monthly payments, also an all-time high. But one of the ways to mitigate this, has been the trade-in. When you upgrade, you sell your existing car to the dealership at the same time. That car, even if it's cheaper, still has value. But now, a trade-in is becoming something else. Negative equity.
"Buyers who financed at 2022's peak prices are starting to come back to trade in, and they're bringing thousands of dollars in old debt with them." A lot of people who trade in, still have a lot of debt. But, it doesn't disappear when you trade in your car. If it still has debt, the dealer you're trading into has to pay it off. And remember that calculation from earlier? About 40,000 repaid on 30,000 borrowed? Well, what if the car isn't worth more than the loan? Someone has to cover the gap. That someone is you.
The old loan, gets added to the new loan. Which creates a bigger problem. Prime borrowers have a 60+ day delinquency rate of 0.42%. But subprime borrowers, have a rate of 6.9%. And these subprime used-car buyers face even steeper interest rates, averaging 19.4% to 21.7%. So if you don't already have good credit… getting a used car is even more expensive. Which means a lot of people, eventually can't pay it off or fall behind. 1.73 million cars were repossessed in 2024, the most since 2009. Y'know, right after the financial crash. Repossessions are especially bad, because a lot of people use their cars to get to and from work.
If you lose access to your car, it becomes really hard to maintain a job. Now, this is only 15% of total car debt, but it's having a big impact. Specifically on a group outside of consumers… dealerships. What if the bank won't even lend you money for a used car? Well, the dealership, in a way, becomes the bank. These are subprime lenders. Used car dealerships that will lend to subprime buyers or those with no credit history. But this is a risky strategy. And now, many of them are collapsing.
Tricolor, for example, went into liquidation in September 2025, owing lenders $900M. America's Car-Mart, the biggest publicly listed buy-here-pay-here dealer, closed 60 of its 154 stores in a year, and lost $139 million. In their Q4 2026 results, they even said "the Company's substantial indebtedness, its liquidity position raise substantial doubt about its ability to continue" And as a result, lenders, namely banks, are pulling back from this entire sector. Even if prices improve… used cars for subprime buyers… likely won't for a while. Places to get used cars are starting to disappear.
The question now is, is this all a temporary downstream wave from the pandemic? Or a new normal? Well, it's looking like a new normal. "I think it's kind of the new normal outside of a big economic impact. Supply is not getting a lot better over the next three to four years." Every used car starts as someone's new car. But automakers began to build fewer, leased fewer and discounted less. The cars that should be on many lots today. never made it. Never made it
down the mousetrap. And as a result everyone is paying more, or moving further down the board. One big car dealership though, is doing quite well. Carvana. The online dealership, with the giant car vending machine. But, they handled the pandemic a bit differently. "Unbeknownst to investors, Carvana's sustainable growth machine was built on a fraudulent pump-and-dump scheme." Now, they're being sued, and to find out what happened, watch this video next.
