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You don’t have to watch the news to know that things are getting more expensive. Current economic trends and inflation are driving up the cost of everyday essentials, such as gas prices, housing, hotels and electronics. Even the average cost of milk is going up. If you are looking for creative ways to cut back and save money, you are not alone.
Over the last few years, many U.S. consumers have sold their vehicles to lessen the impact of rising costs. New car shortages caused by the COVID-19 pandemic led the used car market to hit record-high levels and it allowed some drivers to make a profit off their cars and put money back into their pockets.
While selling your car can be lucrative in the current car market, it’s important to understand the market values for new vs. used cars. In this guide, we explain what you need to know before selling or trading in your used car, and how the cost of your car insurance is affected by the value of your vehicle. We’ll also talk about when used car prices are expected to drop based on expert analysis, which can help you decide if now is the best time to buy, sell or trade in.
Car sales statistics
U.S. consumers saw many economic changes during the COVID-19 pandemic. In the car market, a global chip shortage forced many auto manufacturers to halt production. Some manufacturers even chose to build cars without certain features, like sensor-based crash avoidance technology. Here is a look at how the car market has changed over the last several years, and what’s in store for the future of automotive sales:
- Data shows that car sales are expected to increase from 15.07 million in 2021 to 15.47 million in 2022. (Findthebestcarprice.com)
- The number of new cars sold decreased by 13.3% in November 2021 as a direct result of lingering effects of the COVID-19 pandemic. (Findthebestcarprice.com)
- Trucks and SUVs were the most popular vehicles sold in 2021, with a 1.5% increase in transaction price year-over-year. (Findthebestcarprice.com)
- In 2020, an estimated 30% of new car sales were completed online. Prior to the pandemic, less than 2% of new vehicles were purchased online. (ABC News)
- Online car dealership Carvana sold 244,111 cars in 2020, an increase of 37% from 2019. (ABC News)
- It’s estimated that new vehicle sales will increase by 3.4% in 2022, with 15.4 million new cars sold. (National Auto Dealers Association – NADA)
- In November 2021, inflation reached a high of 6.8%, according to data from the Consumer Price Index. (National Auto Dealers Association – NADA)
- In October 2021, the average used car price was $25,904, which represents an increase of 19.1% year-over-year. (National Auto Dealers Association – NADA)
- For people who purchased a car during the COVID-19 pandemic, most buyers spent between $20,000 and $40,000 on their vehicle. (Cars.com)
- S. consumers spent a collective 30 million hours on cars.com between March 2020 and January 2021, an increase of 9.2% from the same period the year before. (Cars.com)
- It’s estimated that used car prices are about 30% higher than they were a year ago, even though the price of new and used cars is expected to decline. (Kelley Blue Book – KBB)
- In January 2022, the average new car cost $46,404 and the average used car cost $27,633. (Kelley Blue Book – KBB)
- The auto industry accounts for roughly 3% of America’s gross domestic profit (GDP). (Zippia)
- As of 2021, the total value of the American auto and manufacturing industry was $82.6 billion, in large part because vehicle owners spend $698 billion each year on car loans and car insurance. (Zippia)
- In the U.S., the three largest auto manufacturers are General Motors Company (GM), Fiat Chrysler Automobiles and Ford Motor Company. (Zippia)
- Used car prices increased by an estimated 17% between 2020 and 2021. Between 2019 and 2020, used car prices dropped by about 0.2%. (Zippia)
- Automotive experts have predicted that new car inventory in the U.S. will improve, or at least stabilize, during 2022. (Carscoops.com)
What your car is worth in 2022
If you are thinking about selling a new or used car, it’s important to ask yourself, “what is my car worth?” Just because new and used car prices are up, that does not necessarily mean you will receive the offer you are expecting from a dealership or private seller.
When you sell a used car, the year, make, model and condition of the vehicle will affect the car’s resale value, and therefore, the amount of money you can get for it. However, there are a variety of ways to sell your new or used car, and the method you choose can impact the resale value. Popular ways to sell a new or used vehicle include:
- A local dealership: Many local car dealerships will buy your vehicle for cash, even if the dealer does not specifically sell that brand.
- An online dealership: There are lots of online car dealerships, like Carvana and Vroom, that allow you to sell your car online. Usually, someone from the dealership will come directly to your door to evaluate and pick up the car, so it’s mostly hands-off.
- Facebook Marketplace: If you want to sell your vehicle to someone directly, check out Facebook Marketplace for local transactions.
- Craigslist: Craigslist has always been a popular place to sell a new or used vehicle in your area.
In addition to selling a new or used car, you can also think about trading in your vehicle if you are ready to purchase another car. Trading in your car is an easier process than selling, but it often results in a lower payout. The money you get for the trade-in goes directly toward the cost of another new or used car, or your down payment.
Because the cost of new and used cars has increased significantly, you might find that trading in your car does not make the most sense financially. For example, you could end up paying over MSRP for a new car, so it’s important to weigh the pros and cons first. Before you trade in your car, make sure to get quotes from a few dealerships to find the best offer.
In the tables below, we highlighted some of the pros and cons of selling a new car vs. selling a used car, and trading in your car vs. selling your car.
Selling a new car vs. used car
|Selling a new car||Selling a used car|
Experts say that buyers paid 12.2% more for new cars in January 2022 than the previous year.
Selling a new car will likely result in the biggest sale price, especially if the car is in immaculate condition, inside and outside.
Most dealerships are willing to pay top-dollar for almost-new cars, whether you work with a local dealership or online dealership.
|Buyers paid 40% more for used cars this January than they did in January 2021.
McKinsey estimates that the used car market is more than twice the size of the new car market, and is forecasted to continue growing.
Because the used car marketplace is so high, it’s much easier to sell cars that have high miles or have a few scratches.
|Cons||If you still have a loan on your new car, you will probably need to pay it off before you can sell the car.
If you opted for lots of bells and whistles in your new car, you might not get that money back when you sell it.
|You might not make much money on the sale, depending on how old the car is and how much you bought it for.
To get the highest payout, you may need to put some work into the car first, like paint touch ups, new brakes or new tires.
Trading in your car vs. selling your car
|Trading in your car||Selling your car|
|Pros||You’ll save time without all the hassle and worry of selling it yourself by letting the dealership handle the logistics and purchase coordination.
If you want to purchase a new car, you can put the money from your trade-in towards the cost of the new car and complete both transactions on the same day.
When you trade in your car and purchase a different new or used car, you are typically only required to pay sales tax on the price difference.
|You’ll likely get the most money for your car’s value.
You don’t have to worry about purchasing another car right away or even buying another car at all.
There are lots of places to sell your car, both in-person and online, which makes it easy to get multiple offers.
|Cons||You have to haggle with the trade-in salesperson on the fairest price.
You may not be able to trade in your car unless you intend to purchase a different vehicle from the same dealership.
If you are getting rid of your car to save money and rely on public transportation, trading in your vehicle is usually not the best option.
|You have to haggle with the buyer on the fairest price.
If you sell your car to a private party, it can be a cumbersome process, with multiple phone calls, in-person test drives and exchanging of paperwork.
If you need a car to get around, you might have to wait to sell your car until you have another car that is ready to drive.
When will used car prices drop?
Used cars have historically been a more cost-effective way to purchase a vehicle. But if you have shopped for cars during the last several years, you might have experienced sticker shock. Although no one can predict exactly when used car prices will drop (and by how much), many experts have speculated. Here are some statistics on the future of the used car market:
- For used cars that are less than three years old, the average cost is $41,121, a 2.1% decline from about $42,000 in early January 2022. (CNBC)
- Car dealership inventories have increased by about 15% for 2019 models and 22% for 2020 models. (CNBC)
- Used car prices in February 2022 have declined by just $25 from the average price in January. (KBB)
- Research firm KPMG has predicted that used car prices could drop by 20% to 30% after October 2022. (Cars.com)
- A survey from GlobalData found that 49% of automotive executives believe the chip shortage will be over at some point in 2022. (Just-auto.com)
How car value affects insurance rates
The value of your vehicle impacts more than the amount of money you can get for selling or trading it in. Car insurance companies use the actual cash value (ACV) of your vehicle to set your premium and calculate your payout after a claim. ACV is what your car is worth in its current condition, which includes depreciation. Some of the factors that can impact depreciation are age, mileage, wear and tear and accident history.
In addition, the type of car you drive (separate from its value) will impact your car insurance premium. Specifically, things like the car’s safety features, engine size and the cost of parts and repairs is factored into your rate. However, many car insurance companies offer discounts for having an anti-theft device, daytime running lights or an anti-theft device in your car.
When choosing car insurance, it’s important to purchase enough coverage to protect your vehicle in full, based on its value. For example, you might consider getting a full coverage policy or adding new car replacement for more protection. You can check out our list of the best car insurance companies to see which providers are the highest-rated, what each one is best for and each company’s average rates.