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Traditionally, drivers favor used vehicles for their lower price tags. But as inflation remains high and vehicle prices slowly slide toward normalcy, buying used isn’t what it used to be.
While prices have declined, it is not an especially inexpensive time to head to the dealership as high interest rates are sticking around. But this summer can still be a good time to buy used if you truly need a vehicle.
Are used car prices dropping?
The cost to buy a used car is less than what it was a year ago but still may be too expensive for some drivers. Cheaper wholesale vehicle prices do not always trickle down to consumers, as many factors make up what you will pay for your next set of wheels.
The price to get behind the wheel of a used vehicle was near record highs in late June, according to Kelley Blue Book. Drivers who purchased spent over $27,000. This number remains below the cost to buy new, closer to $49,000 in the same month, but the cost is still exorbitant for many drivers.
Luckily, experts predict that prices will drop soon. The cost car dealers are spending at auction has recently hit a decline. Less money spent at auction should mean a decrease in the retail prices that drivers are met with. Wholesale auction prices were down 10 percent compared to the same time last year, according to the Manheim Used Vehicle Value Index.
But some drivers may catch a bigger break than others. Pickup trucks and vans, for example, only experienced a 6.2 and 7.8 percent decrease, respectively, while other vehicle types lost up to 12.5 percent.
Vehicle supply still remains low
One of the two primary factors keeping prices up is the fact that vehicle supply still remains tight and under normal levels. Fewer new vehicles were produced during the pandemic due to supply chain issues, meaning that now, there are fewer lightly used vehicles entering the market.
Based on simple supply and demand, fewer available vehicles mean higher prices. According to Cox Automotive Auto data, 30-day retail sales are down 3 percent compared to the same time last year.
But the market of folks purchasing certified pre-owned vehicles is above 2022 averages and is forecasted to reach 220,000 in monthly sales, according to an analysis of Motor Intelligence data shared by Cox Automotive. Manufacturers and dealers are making up for missing inventory by certifying older used vehicles.
Average used vehicle mileage is up
Another factor that has come up as used vehicle prices return to somewhat normal levels is an increase in average vehicle mileage. The average used vehicle in June 2022 was listed at $28,050 and had an odometer measure of 69,559 miles, according to data presented at Cox’s mid-year review. But this June, the averages were $27,266 and 70,568 miles, respectively.
Across vehicle price ranges, mileage is up for used vehicles. This is likely attributable to the fact that fewer new cars were being manufactured during the pandemic. With fewer cars exiting dealership lots for the first time, the average mileage of the entire fleet increases.
When shopping this summer, it is likely that you will come across vehicles will higher mileage. While this isn’t all bad news, it may mean more trips to the mechanic throughout your ownership.
Is now a good time to buy a used car?
Based on data alone, used vehicle prices are down. In June, the average weekly listing price was down 3 percent compared to 2022, though still much higher than years in the past. But even as prices decrease, high interest rates will continue to make the cost to buy a vehicle more expensive.
Experian data from the first quarter of 2023 found that those buying used saw an average annual percentage rate of 11.70 percent to finance their cars. This is up from 10.26 percent in the fourth quarter of 2022 and even higher than pre-pandemic levels. So while yes, used vehicle prices are lower than they have been over the past year, financing that vehicle will still be pricey.
But drivers’ perspectives are not all doom and gloom. Consumer sentiment was 7.9 percent more positive in June, according to the University of Michigan, hitting its best level since February and up from one year ago. And if you can buy in cash — avoiding the high interest rates — this summer could be a good time to buy a used car.
How to secure a good used car deal
Purchasing a used vehicle carries the benefit of less expensive out-the-door costs compared to getting a brand new one, but there are still ways to save extra money. Consider the following tips when shopping for a used car this summer season.
- Shop around. Not all used vehicle options will carry the same low price. Consider which vehicle is best for your needs and budget.
- Consider an EV. While the cost to buy an electric car tends to be higher upfront, it can cost you less over the lifetime of ownership.
- Apply with a co-signer. If you have found your dream car but would still be stuck with sky-high rates, consider adding a co-signer to potentially lower your rates.
- Shop certified pre-owned. These vehicles are thoroughly inspected before being sold, though you’ll pay a higher price for the increased reliability.
Used prices are down and are expected to continue declining. Consider if you truly need a vehicle now or whether you can afford to wait.
The best way to save money when buying your next vehicle, new or used, is to pay close attention to which lender will best serve your needs. Examine potential fees, available terms and what rate your credit score will qualify you for.