If you’re planning on buying a used car this year, you might want to hold off. The used car market is surging right now and while that’s a good thing for used-car sellers, it’s not so good for used-car buyers. The recent new-car inventory and chip shortages drove up the pricing on used cars, which means that it might actually be a smarter idea to buy a new car instead.
Used car prices are up year-over-year
When perusing the classifieds online on sites like Car Gurus or Autotrader, you might find that many prices are a little higher than they should be. For instance, Car Gurus has its own indication to let you know if a car’s price is “good,” “great,”, “fair,” or “overpriced.” Don’t be surprised if you end up seeing a lot of the latter two ratings nowadays.
According to Consumer Reports, used car prices jumped nearly 30% year-over-year, from May 2020 to May 2021. With many dealers asking close to MSRP for new cars, many buyers are looking to the used car market to find their next means of transportation. However, those prices are higher than average right now, making the thought of buying a new car a little more feasible to some.
Buying a new car this year could be a better idea
Consumer Reports also mentioned that while used car prices are high, the silver lining is that dealers are paying top dollar for trade-ins. This can work in your favor, especially if you’re planning to buy a new car. Buyers typically have the most leverage when they’re trading in their current car for a new one as dealers favor being able to obtain used cars to sell while getting rid of their new car inventory.
“If you’re planning on financing (a new car), it comes with a promotional APR offer as well as some manufacturer to dealer cash, in the usual case,” Ari Janessian, from Boston Automotive Consulting, said. “At the very least, consider new because the depreciation schedule on a new car is predictable right now. What you’re paying for used cars right is what no one has ever paid for in history. But what you’re paying for new is pretty much what everyone is paying, or less than that.”
The market will subside eventually
Those additional discounts that you can typically get on a new car could make that route much more attractive. Although, depending on the used car that you’re looking at – and depending on if you’re buying it from a dealer or private party – that could be a better route as well. It really depends on the situation.
However, if you can hold off buying a new or used car for 2021, then that might be the most ideal situation. Consumer Reports also mentioned that the market will calm down eventually, which could be by the end of 2021. If anything, we would suggest saving your money, if possible, until next year. Or if you really can’t wait, then maybe by a new car on New Year’s Day.