Germany's used car market cools after years of price surges and shortages

The Birth of a Price Bubble: From Supply Shortages to Market Overheating

Germany's used car market cools after years of price surges and shortages

The coronavirus pandemic sent global supply chains into turmoil, hitting the automotive industry particularly hard. When manufacturers scaled back production in early 2020 and canceled chip orders, they had no idea what the consequences would be. Semiconductor producers reallocated their capacity to sectors like consumer electronics and IT, which were booming during the pandemic. But when demand for vehicles rebounded far faster than expected, automakers suddenly found themselves at the back of the line. Estimates suggest that between seven and eleven million fewer vehicles were produced worldwide in 2021 than originally planned.

The chip crisis led to massive production halts and stretched delivery times for new cars to between six and eighteen months. Many buyers turned to the used car market, which became the only viable alternative. The already tight supply of young used vehicles shrank further, as significantly fewer new cars had been registered in 2020 and 2021. This scarcity drove prices skyward. Between 2021 and 2022, average used car prices surged by about 19 percent—a record jump in such a short time.

First Signs of Easing: Where Prices Are Returning to Normal

After peaking in 2023, a cautious stabilization is now taking shape. As of early 2025, the average used car price in Germany stands at around €27,800—nearly the same as the previous year. Compared to the 2023 high, this represents a decline of roughly five percent. Prices are gradually normalizing but remain well above 2019 levels, when the average was just under €23,000—an overall increase of about 20 percent.

The return of leased vehicles to the market is helping ease pressure. Many cars leased during the pandemic are now coming back after three years, noticeably boosting the supply of young used vehicles. This growing availability is dampening price inflation in certain segments. However, used car inventories remain about 25 percent below pre-pandemic levels. Demand still outstrips supply, preventing prices from falling more rapidly.

Electric Vehicles as an Outlier: Steep Depreciation Instead of Price Stability

While combustion-engine cars retain their value relatively well, electric vehicles are experiencing dramatic price declines. Three-year-old battery-electric models are now worth only about 50 percent of their original new-car price. By comparison, three-year-old gasoline cars retain 63.5 percent of their value, and diesels hold 62.2 percent. As recently as early 2023, three-year-old EVs still had a residual value of 61.5 percent—a drop of more than ten percentage points in just a few years. Luxury models like the Mercedes EQE SUV or Porsche Taycan are losing up to 55 percent of their value in some cases.

The reasons for this steep depreciation are multifaceted. Rapid technological advancements in batteries and range have made older models seem outdated quickly. A 400-kilometer range was impressive in 2020, but today, 600 to 800 kilometers is the norm. The high leasing rate for EVs—28 percent for privately used battery-electric vehicles, compared to just five percent for combustion cars—has led to an oversupply in the used market. Buyers remain hesitant due to concerns about battery health and inadequate charging infrastructure.

Segments with Persistently High Prices: SUVs and Popular Compact Models

SUVs are among the winners in the used car market. While other vehicle classes are seeing slight price declines, the value of popular SUV models is even rising again in some cases. Vehicles like the VW Tiguan, BMW X1, and Audi Q3 continue to benefit from strong demand. Their elevated seating position, spacious interiors, and versatility make them especially appealing to families. Even sought-after midsize cars like the VW Golf and Audi A6 are holding their value surprisingly well.

Small Cars and Luxury Vehicles Follow Different Trajectories

The trends for compact cars and premium vehicles are diverging sharply. Budget-friendly models like the Dacia Sandero or Kia Picanto remain affordable, but their resale values are declining as more buyers opt for compact SUVs. The luxury segment presents a mixed picture: German premium models with internal combustion engines are holding their value, while prices for high-end electric vehicles are plummeting. A Mercedes EQS, which once retailed for over €100,000, can now be found as a one-year-old used car for around €55,000.

Structural Shifts: Supply and Demand Find a New Balance

The used car market is still searching for equilibrium. Vehicle ownership transfers rose by 7.4% in 2024 to roughly 6.48 million units, signaling robust demand. In the first quarter of 2025, demand was already 7% higher than the same period last year. Meanwhile, supply is gradually increasing but remains constrained. The average time a vehicle spends on a dealer's lot is about 57 days—well below pre-pandemic levels.

| Metric | 2019 (Pre-COVID) | 2023 (Peak) | 2025 (Current) | Trend | |--------------------------|----------------------|-----------------------|------------------------|-------------------------------| | Average Price | ~€23,000 | ~€34,000 | ~€27,800 | +20.9% since 2019 | | Ownership Transfers | ~6.9 million | ~6.0 million | ~6.48 million (2024) | +7.4% vs. 2023 | | Used Car Inventory | 100% (baseline) | ~70% (sharply reduced)| ~75% | 25% below 2019 levels | | Dealer Lot Duration | ~75 days | ~45 days | ~57 days | Faster turnover |

The market's fundamental structure is evolving. An increasing share of young used cars—former lease returns—are entering the market, lowering the average age of available vehicles. These relatively expensive, well-equipped models are pushing overall price levels higher. Seasonal fluctuations persist: prices traditionally rise in winter and dip slightly in summer, creating strategic opportunities for buyers.

2026 Outlook: Further Normalization or New Price Dynamics?

Next year could bring fresh disruptions. Potential government incentives for electric vehicles might reshuffle the market again. If the EU approves a €5,000 purchase subsidy for new EVs, used electric car prices could face even greater downward pressure, shifting buyer focus toward new models and making secondhand EVs even more affordable. Combustion-engine vehicles may also see some impact, though to a lesser extent.

Experts forecast a modest decline in used car prices for 2026, with steady underlying demand. The normalization of new car production and a growing supply of lease returns should ease market tensions. However, prices are unlikely to return to pre-COVID levels. Rising production costs, inflation, and lasting shifts in consumer preferences have permanently elevated the price floor. The used car market remains dynamic—those who stay flexible and time their purchases well can still find good deals.

Conclusion: The Used Car Market After the Price Bubble

The era of extreme price surges in the used car market is drawing to a close, but a return to pre-pandemic pricing is not on the horizon. While combustion-engine vehicles stabilize at high values, electric cars are experiencing sharp depreciation—creating opportunities for buyers. SUVs and in-demand midsize models retain their worth, whereas small cars and luxury EVs continue to lose value.

Structural changes—driven by lease returns, new powertrain technologies, and potential subsidies—will keep shaping the market in 2026. Full normalization remains a distant prospect, as supply and demand settle into a new, higher equilibrium.

Read also:

• Europe’s abandoned coal mines could power a solar energy revolution
• £6M Suthers Court project delivers 36 new homes to Oldham’s Werneth area
• Australia Proposes Hefty Fines for Companies Failing to Protect User Data
• Banned from Camp John Hay: Ex-mayor and allies face golf course dispute