Buying a used car comes with many benefits, including slower vehicle depreciation, lower insurance costs and a cheaper upfront price. The current state of the new car market reinforces the final point — new vehicles hit record highs in late summer — making now a good time to consider buying a used vehicle.

Current state of the used car market

The summer closed out with high prices, the average used car sold for $28,219 in July and similarly at $28,061 in August, according to Kelley Blue Book. But used vehicles are still dramatically less expensive than what is available on new car dealer lots. Since the start of the pandemic, the vehicle market has swung dramatically away from normalcy, and has been inching back towards normalcy without much success.

But it is not all bad news. While we are not near 2021 levels of used prices and availability, we are in a good spot to buy used, encourages Chris Frey, Cox Automotive’s senior manager for economic and industry insights.

Unfortunately, the cost to finance, own and operate vehicles is still experiencing record high prices. Rate increases made by the Federal Reserve make the cost to finance your vehicle more expensive and gas prices are fluctuating as well. But financing a used car is still less than for new at $515 per month versus $667 in the second quarter of 2022, according to Experian. So, by choosing to finance a less expensive, used vehicle you can save money on your monthly payment.

Used car prices are cooling, but only slightly

Overall, used prices are falling, according to Henry Hoenig, a data journalist for Jerry, but not by much. The Jerry team reviewed the best selling vehicles in 2022 and compared them to 2021 lightly used models and found that, “As of August, only seven of the 10 vehicles were worth more than used than the sticker price on used models.” This means that used car prices are still higher than they have been historically, but on par with the current volatility of the market.

The available used vehicle inventory also remains much higher than new, as dealerships are still playing catch up with supply chain issues. So, while prices may be higher than they have been in the past, the availability of used cars is above that of brand new cars. Inventory for used vehicles is up 10 percent compared to this time last year, according to Cox Automotive’s third quarter industry insights, a positive sign for the upcoming year.

“Prices remain high because there still aren’t enough vehicles,” Hoenig says. “It’s important to remember this isn’t like some of the other COVID-related shortages we experienced.” While manufacturers of other daily products were able to pick back up relatively quickly, cars are more difficult to produce.

It is important to remember that the used car market is built off drivers getting rid of their vehicles, so if there aren’t as many drivers buying new there can be a domino effect on used availability down the line. Due to these combined factors, you may be met with more competition and slightly higher prices for used cars, but that doesn’t make buying a used vehicle a bad option.

Should I buy a used car?

The question of buying a used car comes down to need. There is no perfect time to buy a car, especially with many macro-environmental impacts increasing cost. Because while experts predict that new vehicle inventory should return to normal by spring 2023, most drivers do not have the luxury to wait for prices to decline.

If you are looking to buy a vehicle, buying used over new can mean money saved. The combined factors of high new vehicle demand and low inventory with interest rates above usual levels make vehicle costs more expensive either way, but buying used is dramatically less expensive.

Top 5 questions to ask when buying a used car

While buying used comes with a lower out-the-door price, it can carry additional fear that comes with an unknown vehicle’s past. To mitigate these feelings, ask the right questions to understand the history of your potential new set of wheels.

1. What is the ownership history of the vehicle?

A vehicle with many owners is not always bad news but can mean that the car had major problems that drivers were trying to avoid fixing — or couldn’t fix. Ask the dealer how many owners the vehicle had, along with the amount of time each driver had it. Many owners over short periods of time are cause for concern.

Bankrate tip

Consider purchasing a certified pre-owned vehicle. These vehicles must meet additional requirements created by the manufacturer and guarantee against any vehicle defects.

2. Has the car been in any accidents?

While you can easily check a vehicle’s accident history on sites like Carfax or AutoCheck, it is best to ask the dealer upfront. Even if the accident was minor it is important to know how the damage was handled and if you will have to deal with any repercussions during ownership.

3. Can I look at the maintenance records?

Most authorized vehicle dealerships will have records of the maintenance done on a vehicle, but asking directly can be a good way to gauge the vehicle’s care. You should avoid buying a vehicle that hasn’t undergone regular maintenance because it could mean higher costs down the road.

4. Is there a clear vehicle title?

A clear vehicle title states that the car does not have any remaining disputes in regard to its ownership, confirming that the vehicle does not carry any restrictions that block it from being sold. If the seller cannot present a clear vehicle title, take this as a red flag and walk away from the deal.

5. May I take the car out for a test drive?

It is vital to get a feel for the vehicle before you sign on the dotted line, especially when it comes to a used car. Take your time when test driving and try to get a feel for the handling and the condition of the car. This is also a great opportunity to talk in a less intense environment and ask the salesperson questions about the vehicle.

Next steps

Buying used is a great way to get behind the wheel of a fairly new vehicle while still saving money. And while yes, prices today may be higher, buying used is still cheaper than a brand new option. The key to getting the best used car comes down to asking the right questions and shopping around for the best financing deal.

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