Used Car Prices Are Falling. Is Now A Good Time To Buy?
Used car prices dropped throughout the fourth quarter of 2022. At the end of December, you could expect to pay about $1,000 less, on average, for a used car than you would have at the end of 2021, according to Kelly Blue Book.
At the same time, prices on new cars continue to steadily increase. Which means the days of being able to purchase a new car and then turn around and sell it a year later for a profit are probably over for some time to come.
Since the early days of the automobile new cars lost a significant percentage of their value the instant they were driven off of the lot. However, during the pandemic, supply shortages - especially supplies of computer chips - meant car manufacturers could don’t keep up with demand. Prices rose and wait times for new car deliveries climbed to the point where purchasing a new car could mean a wait of as much as a year.
This state of the market led to many used cars being priced higher than they had been when they were purchased new. Simply because they were available without a wait.
As we move into the spring of 2023 however, the auto market is returning to it’s pre-pandemic normal as supply chain issues are slowly put behind us. All of which makes the lower cost of a pre-owned vehicle much more attractive to price-conscious consumers.
At the same time, demand for new and used cars is being driven down by higher interest rates caused by Federal Reserve Bank’s attempts to curb inflation caused by the pandemic.
This is leading to more inventory of both new and used vehicles on the lots of most car dealerships and dealers eager to sell.
Great Deals Can Be Found
So great deals can still be had but economic conditions at the moment may make some consumers reluctant to sign on to a car loan where interest payments have risen due to Federal Reserve rate increases.
The question to consider is when will you likely need to purchase a new used vehicle and can you wait out the market?
If interest rates remain high or climb even higher and stay that way for several years, the rate you get today may very well look like a steal 18 months from now.
But at the same time, in 36 months, you may be able to get rates significantly lower than they currently are.
Which leads to the question, will your current vehicle make it another 36 months? Or will you be forced to purchase because your transmission went bad 18 months from now? In that case, buying a used car today before rates climb higher may be the best option.
Of course there are buyers who can’t wait out interest rates and need to purchase now. They may right now be forced to grapple with the question “is now a good time to buy a used car?” In most cases, the answer truly is “it depends on your specific circumstances and what you want to buy.”
On the one hand, inventories continue to rise on both new and used vehicles and prices have fallen for most cars and trucks. But for some higher demand models and brands prices will move more slowly.
How Do You Find a Great Deal?
Generally speaking the easiest way to find a great deal on a used car or truck is to research the market and discover the brands and styles that are in low demand.
Some higher demand brands like Tesla, BMW and Volkswagen and more popular body styles like SUVs will see their prices remain stubbornly high. Lower cost, higher gas mileage vehicles may also see slower declines in price. Consumers pinched by high gas prices and inflation will look to ease their strained budgets with lower car payments and cheaper gas bills.
Other brands like Chevy, Mazda, and Dodge are in lower demand and therefore are seeing their prices fall faster. Domestic manufacturers have also had an easier time rebuilding their inventory according to Business Insider.
Coupes and convertibles are also generally in lower demand during tougher economic times. Buyers worried about inflation and recession are far less likely to purchase a “fun car” like a convertible.
That said, one other wrinkle some car buyers may also be struggling with is unloading the car they purchased in the hight of the pandemic shortages. They may have high payments and low trade-in values on cars whose prices were elevated when inventory was tight and selling those cars now will mean taking a significant financial hit.
With prices continuing to fall, the challenge will only continue to increase. Finding a way out now may be the best option for those who no longer can afford the premium they paid a year ago.
No matter your circumstance the best option is to talk with a trained professional sales person at any one of the Stephen Wade family of dealerships. At Stephen Wade Toyota, Stephen Wade Honda/Mazda, Stephen Wade Nissan, Stephen Wade Chrysler, Jeep, Dodge, Ram, Mercedes-Benz of St. George, Stephen Wade Chevrolet Cadillac, or the Stephen Wade Truck Center, they can help you determine what your best course of action is. They can help you research which vehicles are in low demand if you’re looking for a deal, or they can help you find the perfect new car for you if you’re in the market now that prices and inventory levels are returning to pre-pandemic conditions.
