When Will Used Car Prices Fall?

While it is still possible to find a great deal on a used car, the market is far from being “back to normal.” Most experts expect some kind of balance to return to the market, but many shoppers are left wondering when will use car prices fall. Read on to learn the three things you should know.

It used to be that shopping for used cars was a great way to save money. Prudent shoppers would buy reliable used cars to avoid higher sticker prices, taxes, and insurance payments. Over the last couple of years, sadly, the used car market has gone in a different direction. With inventory shortages, supply-line delays, and other issues in the automotive market, competition for used cars causes prices to rise. Buying used isn’t necessarily the best way to save now.

There Is No Normal

To say that buying a used car isn’t what it used to be is an understatement. Before the shortage, you could often buy a slightly older version of the new car you want to get a similar ride with solid savings. That is no longer the case. Thanks to the supply-line disruptions during the height of the COVID-19 pandemic, new car production came to a halt. That meant anyone who needed a vehicle had to look at used cars. When there is a limited inventory and a high demand for that inventory, prices will rise.

Even though new production has ramped up in the last few months, it might be a while before the number of new cars helps alleviate the competition for used cars.

Cars Cost More Than Other Body Styles

While all pre-owned vehicles are experiencing higher prices, older used cars are seeing the largest spike. For example, a three-year-old vehicle saw a median list price jump of 47% over those three years. A five-year-old vehicle saw a median price increase of 62%, and a ten-year-old used car saw a median price jump of 104%.

Funny enough, higher-demand SUVs and trucks aren’t seeing the same kind of price jumps. That is because most automakers were shifting towards making more of these body types, which means they didn’t see the same reduction in production. Used cars were already seeing a slight price hike since they were less popular.

Used Car Prices Will Drop, So Be Prepared

Most experts forecast that the production of new cars will help lower the competition and price of used cars. We may not see these price changes until late 2022 or early 2023. An Automotive News report from earlier this year predicts that used car prices will start to drop in the fourth quarter of 2022.

If you have the luxury of time, waiting to buy a used car until prices fall is a wise decision. Those who don’t have the ability to wait for you need to plan ahead, remain flexible, and understand what it means to potentially take on a larger loan.

Determine how much you can spend and stick with your budget. That might mean not getting the exact make, model, and year that you want, but it will keep you from overspending. Beware of longer-term loans that result in a higher overall cost, even if the monthly payments are more affordable. Finally, make sure to leverage your trade-in. Due to the demand for used cars, dealerships are paying top dollar for trade-ins. The equity from your trade-in can offset the amount you need to borrow to bring that pre-owned car home.

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