Every now and then, you run into someone who has no idea what their used car is worth. Typically, that’s because they think their car is special and should sell for way more than any sane person would pay. “No lowballers! I know what I have!” they shout, usually in all caps. As if a few stickers on their Kentucky Derby Edition somehow add another $5,000 in value.
But if you’ve been shopping for used cars lately, it may feel like everyone’s turned into an “I know what I have” guy. Aren’t used cars supposed to be cheaper than this? In theory, yes, but that hasn’t been the case in 2020. Now we have data from iSeeCars to confirm that trend is real.
Yes, used cars are more expensive
Looking at the numbers, it’s truly shocking how much pricier used cars have gotten. The average used BMW 5 Series now costs $34,157, an increase of $6,924 in only a year. Forget the stock market. Buy BMWs! Well, actually, maybe don’t since flooding the used market with a warehouse of cars would cause prices to drop, which would likely tank your investment. There’s also the issue of storing them, which isn’t something you have to worry about with index funds.
Although the 5 Series is an extreme example, it’s far from the only used car that’s more expensive than it was a year ago. Across the industry, used car prices are up an average of 9.5% or $2,193. That said, the increase in used prices varies wildly based on the type of vehicle.
Which used vehicles appreciated the most?
Sadly, your station wagon may be a little more valuable than it was a year ago, but they’re only up 5.9% or $1,007. Pickup trucks, on the other hand, have increased an average of 14.0% or $4,413. Coupes somehow beat pickup trucks, though, gaining 15.9% of their value, which works out to $5,325.
And the segment that’s gained the most value since last October? It’s not SUVs like you might think. No, it’s convertibles. Seriously. The average convertible is now 27.2% more expensive, gaining a whopping $10,429 in value over the last year. Bet you didn’t see that one coming.
Why are used cars more expensive than a year ago?
The biggest factor here appears to be the pandemic, or more specifically, the economic instability that the pandemic caused. While others hold onto their cars longer, people who need to buy a car don’t necessarily want to pay the premium for something brand new, so they look to the used market. And with increased demand come higher prices. But iSeeCars also has a few ideas about why certain segments appreciated more than others.
“Interest rates are lower than normal, which can help offset heightened used car prices for anyone who needs a car in the short term,” said executive analyst Karl Brauer in a statement. “The cars with the biggest price increases likely translate to higher trade-in values for consumers who own these cars, while cars with price decreases present savings opportunities for those looking to make a used car purchase.”
Brauer also said that currently, “[d]emand for sports cars outpaces what is available in the used car marketplace, and dealers don’t have to be competitive with pricing because buyers of these kinds of cars may not be bargain-conscious. Pickup trucks have soared in popularity and sales remained steady even during the pandemic, which shows that people may need pickup trucks for work and are willing to pay top dollar.”