The year 2022 will go down as one of the strangest for the US used car industry.
Consider that used cars manufactured in the early 1970’s have a higher average price than vehicles manufactured in the last few years, or that the average price of a used car with less than $75,000 mileage is nearly $20,000 -dollar lies. However, this number halves once the threshold of 75,000 is crossed https://legaltemplates.net in a recent study.
Or consider the average price of a new car in 2022 of $33,000 compared to $26,700 in 2021, with the average dealer markup being $10,000 this year.
“Prospective car buyers are facing the perfect storm,” said Scott Kunes, chief executive officer of Kunes Auto Group. “Federal Reserve interest rates have skyrocketed, inflation has skyrocketed, there is a shortage of cars and auto parts, and gas prices are at record highs.”
As interest rates rise and consumer confidence falls, Kunes sees both new and used car sales slowing.
“The bright spot is that there is still pent-up demand due to the supply chain crisis, which should keep prices stable,” he said. “As manufacturers ramp up production, we’re seeing a return to rebates and incentive rates to steer sales in the right direction.”
Other auto industry gurus agree, though prices won’t drop to 2021 levels anytime soon.
“The used car market continues to move,” said Kevin Roberts, director of industry insights for CarGurus. “However, it is now a market where vehicle prices have fallen from their historic highs in the summer.”
For example, in October, the average list price for used items fell 1.8% to just under $31,000.
“Yet despite significant price declines over the past two months, prices are still up 3% year-on-year and remain up almost 35% year-on-year,” Roberts noted. “Prices are likely to continue falling in 2023, but there is uncertainty about how fast they will fall and where prices will settle.”
Tips for Getting a Square Deal on a Used Car
The good news is that there are still ways to save money when buying a car, especially if you follow these steps:
Find a local retailer that offers multiple financing options to suit your needs. If your credit score is low, take steps to improve it.
“Also, be open to discussing your budget and needs with your retailer,” Kunes told TheStreet. “Most people come to the dealership thinking they want a certain make or model, and most of those people end up buying something completely different. Our customers often find everything they are looking for in a car that better suits their budget.”
Ask about interest subsidies. “Manufacturers in the automotive industry are increasingly responding to demands from consumer advocates for tariff subsidy programs.
“While this is often a lot for the consumer, they should make sure they are dealing with a knowledgeable retailer who can work best within their budget,” notes Kunes. “Often taking advantage of rebates and an unsubsidized interest rate is often beneficial in the long run, or a lease may present the best option.”
Be ahead of the price curve. With prices falling, now is a better time to buy a used car than it was six months ago.
“To get the best deals now, budgeting and research are key,” Roberts said. “Create a needs list and prioritize those needs before you start searching. “Some buyers need fuel economy above all, while others need to prioritize cargo space, for example.”
Once buyers know what type of vehicle they should be looking for, “they can dive into reviews and start searching,” Roberts said.
Get pre-approved. Used car consumers need to determine how their new wheelset will be purchased.
“A cash transaction is easy, but many buyers need to fund their next vehicle purchase,” Roberts said. “In that case, secure pre-approved financing before going to the dealer. When budgeting, consider both the monthly cost of the financing terms — say, paying $300 per month — and the total cost of the vehicle over the life of that loan.”
Do your homework. Smart consumers of used cars receive vehicle history reports and pay for pre-sale inspections before signing the dotted line.
“Many dealers provide free historical reports, but paying for a pre-sale inspection can serve as a form of insurance against a potential buying headache,” noted Roberts.
Buy now or wait?
Should buyers with used cars now wait until later in 2023? It really depends.
“Buying now or later is a complex calculus for consumers,” Roberts said. “Key factors will depend on whether the consumer wants to finance their vehicle or buy with cash. Interest rates are expected to continue to rise in the coming months.”
Raising interest rates could erase any gains from waiting for prices to fall further, Roberts noted.
“In addition, stock levels of used vehicles are still below pre-COVID levels. So when you find exactly the vehicle you want, consider buying it now rather than waiting for the price to drop,” he said.