With the way pricing for used cars is right now, it’s hard to tell if it’s an excellent time to buy from a financial perspective. It’s hard to gauge whether the market is starting to settle for good or if prices are going to spike again. Gradually drawing supply-chain shortages and production delays seem to point negatively toward costs increasing. However, the first quarter of 2022 shows a steady decline. So, should you buy a used car right now?
Numerous factors could lead to the used car market staying inflated
According to Kelley Blue Book, the price of new and used cars saw all-time highs in December. However, through March, the prices have been trending downward. That being said, the average cost of vehicles is still at a record high. Compared to March 2021, the average price of a used car was up over 30 percent in March 2022.
Unfortunately, more supply-chain issues are inbound. Continuously growing Covid-19 cases in Asia have once again slowed production. Fortune reports that Chinese lockdowns for their “zero covid” policy are going to have a massive impact on global supply chains. Additionally, the ongoing war in Ukraine created a shortage of neon, an essential element in the production of silicon semiconductor chips. So, the chip shortage has no foreseeable end in sight.
KBB says that, on average, non-luxury car buyers paid over $900 more than the MSRP price for a new car. Luxury car buyers paid a remarkable $2,550 over MSRP, too. Furthermore, the inflation markups on some used vehicles like the Hyundai Sonata Hybrid have soared to over 60%, costing nearly $10,000 more on average than this time last year.
According to Cox Automotive executive analyst Michael Krebs, the prices will remain high for the foreseeable future.
“With a myriad of supply chain issues disrupting global vehicle production, we expect inventory to remain tight through the rest of the year and prices to remain high,” said Krebs.
However, Krebs added that he doesn’t believe there will be any more record highs.
Shop now if you dare!
With prices still sitting as high as they are, there’s a decent chance that depreciation will take a pretty hard hit eventually. Once supply-chain shortages are situated, no matter how long it may take, prices may drop pretty low once again and result in taking a pretty substantial relative loss.
However, if you’re in a position where you need a car and don’t have any plans for resale for the foreseeable future, taking advantage of this bit of a lull may be your best bet.
Additionally, if you have a vehicle to trade-in, now’s a good time to do so. Taking advantage of these record highs and limited dealer inventory means you could potentially negotiate a pretty good trade deal.
Finally, if you’ve got a vehicle that you could sell and don’t need to replace, now is absolutely the time to do so. There’s no reason to leave that cash on the table with record highs and dealerships desperate for used inventory! KBB says that dealerships are most in need of affordable cars under $10,000 right now. So, you may have them in a position where they’ll make you an offer they can’t refuse!
Overall, if you’re concerned about near-future resale, then now is probably not the best time for you to buy a new or used car. However, if you need a solid daily driver that you can hang on to for the next decade, this lull is a great time to buy.