The year 2022 will go down as one of the most peculiar ones ever in the U.S. used car sector.
Consider that used cars manufactured in the early 1970s have a higher average price than vehicles made in recent years or that the average price of a used car with mileage less than 75,000 is close to $20,000. However, that number halves once the 75,000 threshold is passed, noted https://legaltemplates.net in a recent study.
Or consider the average price of a new vehicle in 2022 clocks in at $33,000 compared to $26,700 in 2021, with the average dealer markup at $10,000 this year.
“Prospective car buyers are facing the perfect storm,” right now said Kunes Auto Group chief executive officer Scott Kunes. “Federal Reserve interest rates spiked, inflation jumped, there’s a shortage of cars and car parts, and gas prices are at a record high.”
As interest rates rise and consumer confidence falls, Kunes sees both new and used car sales slowing.
“The bright spot is that there is still a pent-up demand due to the supply chain crisis that should keep prices stable,” he said. “As the manufacturers ramp up production, we do see a return to rebates and incentivized rates to keep sales going in the right direction.”
Other auto industry gurus see things the same way, although prices aren’t coming down to 2021 levels anytime soon.
“The used car market remains in a state of flux,” said CarGurus industry insights director Kevin Roberts. “However, it’s now a market where vehicle prices have started to come down from their historic highs witnessed over the summer.”
For example, October saw the average used listing price decreasing by 1.8% and coming in at just under $31,000.
“Yet even with significant pricing declines over the last two months, prices are still up 3% compared to where they were last year and remain up nearly 35% compared,” Roberts noted. “Prices are likely to continue to head lower in 2023, however, there’s uncertainty about how quickly they will come down and where prices will level off.”
Tips on getting a Square Deal on a Used Vehicle
The good news is, there are still ways to save money on a car purchase, especially if you follow these actions steps:
Find a local dealer that has several financing options to fit your needs. If your credit score is low, take steps to improve it.
“Also, be open to discussing your budget and your needs with your dealer,” Kunes told TheStreet. “Most people come to the dealership thinking they want a certain make or model, and most of those same people end up buying something completely different. Our customers can often find everything they’re looking for in a car that better fits their budget.”
Ask about interest rate subsidies. “Increasingly, auto industry manufacturers are responding to consumer advocates’ calls for rate subsidy programs.
“While these are often a great deal for the consumer, they should ensure they are working with a knowledgeable dealer that can work within their budget in the best way,” Kunes notes. “Often times taking rebates and an unsubsidized rate will be beneficial in the long run, or a lease may present itself as the best option.”
Get ahead of the price curve. With prices declining, now is a better time to be used-car shopping than six months ago.
“To get the best deals now, budgeting and research are critical,” Roberts said. “Create a ‘needs’ list and prioritize those needs before diving into the search. “Some shoppers may need great fuel economy above all else, while others will need to prioritize cargo space, for instance.”
Once shoppers know what sort of vehicle they should be looking for, “they can dive into reviews and begin their search,” Roberts said.
Get pre-approved. Used vehicle consumers will need to determine how their new set of wheels will be purchased.
“A cash transaction is simple, but many shoppers will need to finance their next vehicle purchase,” Roberts said. “In this case, secure pre-approved financing before heading to the dealership. When budgeting, consider both the monthly cost of the finance terms — a $300 per month payment, for instance — and the total cost of the vehicle over the course of that loan.”
Do your homework. Smart used auto consumers will obtain vehicle history reports and pay for pre-purchase inspections before signing on the dotted line.
“Many dealerships will provide history reports free of charge but paying for a pre-purchase inspection can act as a form of insurance against buying a potential headache,” Roberts noted.
Buy Now, or Hold Off?
Should buyers wait until later in 2023 on used cars right now? It really depends.
“Buying now versus later is a complex calculation for consumers,” Roberts said. “Key factors will depend on whether the consumer is looking to finance their vehicle or purchase with cash. Interest rates are expected to continue to rise in the coming months.”
The increase in rates could offset any gains from waiting for a price to drop further, Roberts noted.
“Additionally, used vehicle inventory levels are still below where they were pre-COVID, so if you find the exact vehicle you want, consider purchasing now versus waiting for a price decline,” he said.