Home » Articles » Titles » Will Used Car Prices “Go Back to Normal” Anytime Soon?
So, what is going on with used car prices? Was this recent little blip and drop in price just a head fake, and will it be only a drop in the bucket? If you’re in the market for a used car, now might be the time to buy because they may go up again. You might be expecting used car prices to crash, but here are some big headlines and data behind the scenes that show why that might be the case.
First of all, according to CNBC, there may not be a return to normal for the used vehicle market. There was a decline in price through the end of last year in 2022, but inventories remain low, and the pause in production might make used cars back up on the upswing.
We’re seeing that already used car prices are surging again. This is from March 30th, so whenever you’re watching this, it’s the beginning of 2023. According to the article, it says, “Nice while it lasted for nearly a year.” The average used vehicle price has been edging towards affordability for millions of people. It didn’t crash; it’s edging up slowly. The relief felt belated and slight, but it was welcome. However, the supply of used vehicles is failing to keep up with demand, and prices are creeping up again, with signs pointing to further increases.
Why is that? Well, you’ve got to remember that during 2020 and 2021, new cars were not produced at the same volume as in the past. So now, in 2023, a three-year-old used car is a 2020 model. They hardly made any new cars in 2020. Therefore, the amount and volume of available inventory are meager because we’re going through that dip where new cars weren’t produced at the time. At the same time, the demand for used vehicles is going through the roof. People want to buy used cars. Why is that? Here’s why.
New cars are now at an average transaction price of $50,000. So, the executives at Toyota say we’ll soon be paying $50,000 as the average transaction price for new cars. The average new car transaction price is around $47,480, and it’s only going up. The used car market isn’t going to slow down either. So, many factors are at play that put pressure on used car pricing, pushing them upward. Therefore, if you’re looking for a used car, that may be a problem.
It also comes in at the lower end, in the three or $4,000 range. Let’s take a look. According to one dealer, many customers can’t afford either new or late-model used cars. Some potential buyers he knows are using tax refunds to make ends meet. Used, inexpensive cars are now becoming more of a luxury. The market needs vehicles that are three, four, and $5,000 right now. Behind the vehicle shortage and inflated prices is the principle of supply and demand. It’s elementary, right? Again, they repeat that new cars are priced at $48,000, which is beyond reach for many. This will not make a return to what they call “normal.” Notice “normal” means what it was four or five years ago. That’s history.
In 2018 or 2019, there were plenty of new cars being produced. You could buy a nice new car for $30,000 to $35,000. And in 2014 or 2015, there were tons of vehicles produced. So, a three-year-old used car was easy to find in 2018, right? If you’re in 2018 and looking for a three-year-old car, 2018 minus three is 2015. In 2015, there were around 12 million to 14 million new cars produced. There were plenty of them around.
Well, now fast forward to 2023. If you go back to three years ago, few cars were produced, and the new cars had a much higher price. So, all these factors are coming together to make finding a good used car for a decent price difficult. Additionally, with the high-interest rates, one of these articles shows that the used car interest rate is now 11%. So, you went from 8% to 11% in one year, and that’s going to have a significant effect on your ultimate car payment.
If you get a three-year-old car, you can get a four-year loan, resulting in a much higher payment than a five-year loan on a new car at 11%. You know, you’re looking at monthly payments of six to $700 for a used car. New vehicles are even worse. New cars are averaging about a thousand dollars a month for the price of a $50,000 car. So, keep this in mind as you’re shopping. And if you know you’re going to need a car in the next couple of years, now might be the time to buy because it’s possible that the prices won’t go any lower and they might start creeping back up.
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