February gains signal momentum ahead of tax season demand
Used-Car Prices Rebound in February
Used Car Prices Strengthen. After the typical seasonal dip at the start of the year, used-car prices showed renewed strength in February, according to the latest Carfax Used Car Index.
Most vehicle segments experienced year-over-year price increases, signaling a broader market recovery as tax season approaches.
Broad Gains Across Most Segments
Out of seven vehicle categories tracked by Carfax, six posted annual price growth. On a month-over-month basis, four segments increased, one remained flat, and two declined slightly, by less than 1%.
SUV prices remained stable both month-over-month and year-over-year, while passenger cars dipped slightly from January but still rose compared to last year.
Pickup trucks saw a modest monthly decline but posted a solid 4.4% annual increase, reflecting continued demand in the segment.
Strength in Luxury and Electrified Vehicles
Luxury vehicles showed notable gains, with luxury SUVs rising both month-over-month and year-over-year. Luxury cars also posted increases, including a strong 9.2% jump compared to February 2025.
Hybrid and electric vehicles continued their upward trend, while vans led monthly growth with a 2.7% increase.
Tax Season Driving Demand
The February price recovery aligns with typical seasonal trends tied to tax refunds.
As consumers receive federal and state refunds, many allocate those funds toward vehicle purchases, increasing demand across both new and used markets.
This year, the impact may be even stronger. The IRS reports that average tax refunds are up about 10% year-over-year, reaching $3,804—potentially fueling additional buying activity.
Supply Constraints Supporting Prices
According to J.D. Power, the average used-vehicle retail price reached $29,488 in February, up $448 from the previous year.
This continued strength is largely driven by the limited supply of newer used vehicles, a lingering effect of reduced new-vehicle production during the pandemic.
Trade-In Values Remain Strong
Higher used-car prices continue to benefit consumers trading in vehicles.
Average trade-in equity held steady at $7,013, giving buyers additional purchasing power. However, the share of buyers with negative equity is expected to rise to 31.5%, indicating growing pressure in certain market segments.
Used Car Prices Strengthen. Gradual Upward Momentum
With demand increasing and supply constraints still in place, used-vehicle prices are expected to remain under upward pressure in the near term.
As tax season progresses, the market could see further strengthening, especially in high-demand segments.