Used car prices have declined from their previous highs in the recent past. Additionally, choosing the best time to find a great deal requires careful consideration. Limited supply and high demand have kept prices historically high, despite the good news of declining prices. In this article, we look at the findings of Edmunds.com's First Quarter 2023 Used Vehicle Report to determine if this is the right time to take advantage of a deal.
Used Car Prices:
The average transaction price for used cars dropped from $30,000 in the first quarter of 2022 to $28,0000 in the first quarter of 2023, according to Edmunds' data. However, this figure represents a startling 44% increase from the average used car's price of $19,500 five years ago. Although the report indicates that 31% of used cars were sold for under $20,000 during this quarter, that number is significantly down from nearly 60% five years ago.
Factors Influencing High Prices:
The main factor influencing the used car market's persistently high prices is the lack of available vehicles. As the number of new cars leased decreased from 1 million in the same period of 2018 to 559,000 in the first quarter of 2023, fewer people returned their vehicles at the end of their leases. This drop in lease returns has had a direct effect on the supply of used cars on the market. The fact that trade-in volumes decreased from 6.2 million vehicles in 2018 to 5.5 million vehicles in 2018 further contributed to the lack of used cars.
The Effects of Automobile Rental Companies:
The supply of used cars has been reduced in part due to the actions of car rental companies. These businesses encountered difficulties acquiring new vehicles during the recent parts shortages, which reduced the number of vehicles entering the used-car market. As a result, when compared to the time before the parts shortage, the rental cars that are currently for sale are more expensive and older. While the average price increased to $28,916 from $15,829 over the same time period, the average age of off-rental vehicles increased to three years in March from 1.9 years three years earlier.
Prices for new cars and their trade-in value:
The market for new cars has seen even more inflation, despite the fact that used car prices have remained high. The average transaction price for a new car was $47,774 in the first quarter of 2023 as opposed to $35,784 in the same period in 2018. This disparity suggests that people who have held onto their cars despite rising new car prices and a shortage of available inventory may profit from higher trade-in values. Your trade-in vehicle might be worth more right now than it would be if you traded it in earlier, even with higher mileage.
Important Advice for Used-Car Buyers:
Prospective used car buyers should be extra careful and do extensive research given the current market conditions. Consumer insights analyst for Edmunds Joseph Yoon offers the following shopping advice:
1. Know the value of your trade-in: A key negotiating tactic is to know how much equity you have in your trade-in. Get a free appraisal from a reliable website, like Edmunds, before you start looking for a car so you can include the value of your trade-in when determining your budget.
2. Shop for preapproved: financing because used-car interest rates are currently very close to records. To get the best deal, get approval from several lenders and contrast their offers with the dealership's financing rate.
3. Flexibility and thoroughness: If you typically buy 1- to 2-year-old used cars, think about shifting your focus to slightly older cars. Purchase from reputable car lots that provide thorough vehicle history reports. Before making the final purchase, think about having the car inspected by a mechanic, and always take the car for a test drive.
4. Future Price Predictions for Used Cars: Although it's possible that automakers and dealers will offer sizable incentives to boost new car sales, such developments are uncertain and could potentially lower used car values. Automakers have carefully matched vehicle production with demand after learning from inventory glut problems that existed before the pandemic. Customers shouldn't anticipate significant deals or discounts for the rest of the year as a result.
Conclusion:
Although used car prices have dropped from their peak, the current market environment still makes it difficult for buyers to look for a deal. Insufficient supply, high demand, and small trade-in volumes all worked together to keep prices high. Prospective buyers must carefully investigate and weigh their options. Buyers can better navigate the market by learning about trade-in values and looking into preapproved financing. It's important to keep in mind that it's unlikely there will be any significant price reductions or big discounts in the near future.
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