Supply is falling. Demand is rising.

Anyone with a basic understanding of economics knows what that means.

And as the law of supply and demand decrees, used car prices are beginning to rise, according to CarGurus’ August 2024 Intelligence Report, released this week.

The report showed used-car inventory levels down in August for the third consecutive month, dropping 2% below last year and 7.4% below August 2022 levels. Demand, on the other hand, has been soaring since the beginning of summer, reaching levels not seen since March 2022.

The CarGurus Used Vehicle Demand Index, based on monthly vehicle departures per dealer with 100 equaling the level in November 2019, came in at 118.1, a 7.5% year-over-year increase.

So where are prices going? Up, of course. The report showed August average used-car retail price rose $200 from July to $28,500, just below the 2024 high of $28,600 set in March, though still far less than the $30,100 average of August 2023.

But CarGurus director of industry insights Kevin Roberts said the picture is actually more complicated than that.

“Our Vehicle Demand Index speaks to the growing consumer need for affordability,” he explained. “Although overall used demand is up year-over-year, cars priced under $30,000 saw significant increases in activity while vehicles over that threshold actually saw an annual decline in demand.

“With used car demand at its highest levels since March 2022 and inventory down year-over-year, we can expect competition to remain high for this segment.”

That high demand has used cars flying off the lot, according to the CarGurus report, which showed days on market, days to turn and days’ supply all down since June and all below the levels of the past two years.

While supply is shrinking in the used-car market, new-car stores are swimming in inventory, with supply up 55.1% year-over-year and a staggering 193.3% above August 2022. That’s helping drive retail prices down, with the August average of $50,100 down from the 2023 average of $52,000.

The full report is available for download here.