For the first time in months, used cars finally got a little bit cheaper in February — but only by a measly $25, according to Kelley Blue Book. The price for the average used car is still a painfully high $27,608, and with new cars selling for an average of $5,000 more than last year, the used market is crowded with priced-out buyers who had been looking to buy new.
First, it was “survive the holidays.” Then it was “get through the winter.” Now, on the other side of daylight savings time, has the moment finally arrived to buy a used car? GOBankingRates asked the experts.
An Old Chip Shortage and a New War Are Keeping Prices High
At the start of the new year, there was a glimmer of hope that the market was loosening up, but Russia’s invasion of Ukraine quickly put an end to that.
“In January and early February 2022, there were signs of a little less pressure on prices in the used car market,” said David Traver Adolphus, an automotive expert and commerce editor for AutoGuide.com. “But any accurate predictions about this year disappeared the moment war started in Europe. There have been some hints in late February and March that prices are easing, although it’s only by a few hundred dollars. Unfortunately, this probably doesn’t mean that used cars are getting any cheaper — just that all the good ones have been sold.”
Meanwhile, the never-ending chip shortage got so bad that automakers began decontenting new models — selling them without features just so they can get them onto lots, according to Adolphus.
“It can easily be six months from ordering to delivering a new car, if not longer,” he said. “And there are luxury brands for which the entire production run is completely sold out.”
That dynamic continues to put intense downward pressure on the used car market.
“Vehicles that would have been junked two years ago are now getting rebuilt, inventories are profoundly depleted, and the average used car price is now higher than the average new car price 10 years ago.”
Unless You Absolutely Can’t Hold Off, Do Yourself a Favor and Wait
Optimists should get to have their say, but there’s just no sugar coating the current situation.
“Now is not the time to buy a new or used car unless you have no options,” said Lauren Fix, automotive sector analyst and founder of Car Coach Reports. “Used car prices are up 40% and new cars, if you can find what you want, are typically more than sticker price. Dealers are adding ADM — additional dealer markup — or a market adjustment price, which can be as little as $1,000 to as much as $100,000 on premium sports cars.”
Fix notes that larger SUVs and high-mileage cars are your best bet on today’s used market, but she points out that you’ll soon lose your gains either to repairs or higher gas expenses. If you’re thinking that with both cars and gas so badly overpriced that now might finally be the time to take the plunge and invest in an EV, think again.
“Electric cars are just as hard to find at sticker and all brands are dealing with multiple shortages beyond the chip shortage,” said Fix.
Wait for How Long? At Some Point, I’m Going To Need a Car
In short, if you were planning to buy but decided to wait out the winter, you’re going to be disappointed now that you’re emerging from hibernation.
“I am not sure that this spring is the right time to buy a used car,” said Julie Bausch, managing editor of CarTalk.com. “Inventories are still very bare, at the moment, and supply constraints have elevated the prices of what is currently on offer. If I were a consumer, I’d wait it out for another season or two.”
Depending on who you ask, a season or three might be even better.
“Used vehicle prices will likely see a decline in early autumn,” said Matas Buzelis, automotive expert and head of communications at carVertical. “Demand for used vehicles remains incredibly high. It means that used vehicle dealers will face a shortage of vehicles through the second quarter of this year. However, the availability of used cars should improve in Q3.”
With the balance of supply and demand so thoroughly lopsided, the inflated cost of buying a vehicle is only one auto-related expense that’s now more expensive.
“At the moment, everything is elevated in price,” said Bausch. “Gas, insurance policies, maintenance.”
Although … Maybe It’s Just the Right Time To Make Your Move
Virtually every expert who GOBankingRates interviewed cautioned buyers to wait as long as they can. One, however, saw the glass as half full.
Robert Muñoz of SensibleMotive, a site that covers driving, vehicle maintenance and automobile accessories, thinks that now is the perfect time to take whatever deal you can get on the used market.
“No. 1 is interest rates,” said Muñoz. “Not for buyers, but for dealers. As interest rates start to creep up, dealerships with a lot of vehicles on finance are starting to get spooked — and they’re looking to sell off a portion of their fleet to minimize outgoings.”
That, according to Muñoz, means prices are starting to drop and that buyers should be able to find better deals out there than those that were available at the tail end of last year — but the good news doesn’t stop there.
“The second reason why consumers should think about buying a used car now is that prices might be rising again sooner than you think,” said Muñoz. “When income tax returns are submitted in April, a flurry of refunds follows soon after, and that increased spending power in consumers’ hands often translates to a bump in the price of used cars.”
Muñoz specifically suggests looking past SUVs, crossovers, hatchbacks and trucks and instead concentrating on out-of-vogue family sedans.
“In January 2022, car sales were down 10% across the board, but sedans, in particular, lacked demand,” said Muñoz. “That means dealers are knocking up to $2,000 from common vehicles like the Honda Accord and the Subaru Legacy.”
No matter the model, Muñoz is adamant that now is the time to make your move.
“If someone is thinking about buying a used car, I’d recommend them to make the purchase sooner rather than later,” he said.
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