CAR buyers are feeling the squeeze as a beloved vehicle type is very nearly a thing of the past with prices rising rapidly.
In recent years, drivers are increasingly aware they’re being forced to settle for less while paying more.
Data shows the average price for a three-year-old used car has risen to $32,600[/caption]
Popular models by the likes of Chevrolet, Honda and Toyota have shot up since before the pandemic[/caption]
However, buying second-hand is still far cheaper than buying new[/caption]
But a recent report by the Detroit Free Press highlights just how severe motoring price wars have become, with the price of a late-model used car a prime example.
Their data reveals the average price for a three-year-old used car has risen to $32,600 – up by nearly $9,500 since 2019.
What’s more, cars under $20,000 are increasingly rare, with only 11% of used cars in this price range today compared to over half before the COVID-19 pandemic.
Experts at research website iSeeCars.com point to a few different reasons for the sudden change, including inflation, restricted new car production during the pandemic, semiconductor shortages, increased demand due to suburban migration and fewer leased vehicles returning to the market.
They summarised by saying: “The sub-$20,000 used car is almost gone.”
“There’s very little negotiation going on for used cars because demand is so high,” said Karl Brauer, executive analyst with iSeeCars.com.
“The price of used cars was dropping for the last two years, not dramatically, but going down a little bit every month.
“The last three months, it’s gone up again.”
One example they pointed to was in metro Detroit, where the percentage of three-year-old cars priced under $20,000 dropped from 52.2% in 2019 to just 13%.
Although, naturally, buying second-hand is still far cheaper than buying new.
According to Edmunds.com, the average manufacturer’s suggested retail price in June was $50,523.
That contrasts with the average transaction price, what a customer pays for the car, at $48,261.
Brauer’s study also showed that the bestselling three-year-old used models that are virtually no longer available for under $20,000 include the Chevrolet Equinox, Honda Civic, Kia Sportage, Nissan Rogue, Toyota Camry and Corolla.
For example, in 2019, 97.6% of three-year-old Honda Civics could be bought for $20,000.
But today, just 5.7% of three-year-old Honda Civics are available at that price range.
He added: “That’s a 94.1% drop-off.
“The Toyota Corolla, 99.9%, was available to a $20,000 buyer in 2019 and now it’s 62.9% so they’ve lost about 37%.
“Chevy Equinox, 88.1% were available in 2019 for a $20,000 buyer and now 22.3% for a $20,000 buyer.”
Passenger cars saw the biggest price increase since 2019, up 48.7%.
Meanwhile, prices for used pickups rose 28.8% and used SUV prices are up 15.4%.
Brauer added that the only good news for drivers is that cars are built to a higher quality these days, meaning older used models with higher mileage will last longer.
“They have to buy older cars with higher mileage,” Brauer said.
“When you look at what’s selling, for $20,000, it used to be a 3-year-old car and it had like 32,000 miles on it. Now, $20,000 buys you a 6-year-old car with 71,000 miles on it.
“If you’re forced to buy an older, higher mileage car, thankfully older cars are better than they used to be.
“I used to consider 100,000 miles as: ‘That’s disposable.’ That’s not true anymore. You can get to 200,000 to 250,000 miles fairly easily.”
He also encourages buyers to be flexible with the make and model of a car and to expand their search radius, research market values and get pre-purchase inspections.
In the meantime, used car prices are unlikely to return to pre-pandemic levels unless there is significant economic disruption.
While stabilization is possible, prices are expected to remain high.
Tips on buying a used car
When looking to buy a used car, U.S. News & World Report experts have a few tips before walking onto the sales lot.
- Set a realistic budget. Some cars are more expensive to insure and register than others depending on engine type, body style, weight, and the amount of doors. Before being swindled by a crafty salesman, it’s important to know what you can and can’t afford.
- Researching what car would fit best into your lifestyle can save a lot of time. Would a sedan work better for your garage or narrow street? Would a truck meet hauling or towing needs? Knowing what suits your needs can narrow down your options.
- Look into certified pre-owned cars. Certified pre-owned cars are backed by the manufacturer and come with comprehensive warranties at affordable prices. Some manufacturers have better deals on CPO cars, so research diligently.
- Not all financing options are created equal. Depending on where you look to finance, if that’s on the table, be very careful about who you finance with. Your best option would be to get preapproved by your bank before going in to give you an idea of what rates are affordable, and to give a dealership incentive to meet or beat those rates.
- Consider a used car inspection. Depending on where you’re buying a vehicle from, you can opt to pay roughly $200 for a used car inspection to have key components examined by an expert.
- Consider a vehicle history report. When things get close to signing, buying a vehicle history report based on the VIN can help clarify the previous owners, maintenance records (if it was taken to a dealership), title status, and more.
Source: U.S. News and World Report
