Once-in-a-lifetime circumstances have created a used car market with unprecedented prices. Supplies are low, and demand is at a record high. The news isn’t all bad, though. Recent trends in automotive pricing suggest used car shoppers may soon get relief from soaring prices.
A historic used car market
The used car market, like all other industries, was hit hard in 2020. Rental agencies sold off fleets that were once a significant source of pre-owned inventory. Superconductor shortages killed new car inventories, so owners are holding on to their pre-owned cars longer.
The demand for used cars is high while dealerships struggle to fill their sales lots. Buyers are frustrated with delays and missing features caused by chip shortages and turning to used options. The situation is a perfect storm to drive up prices to record highs.
The Federal Reserve has been carefully monitoring price inflation across the automotive industry. Prices are so high that buying new can cost less than buying used. Automotive search engine iseecars identified 16 cars from model years 2019 and 2020 that now sell for more than their original retail price.
Prices may start to come down in a few weeks
Even in a historic market, buyers can make some predictions based on trends. In June, wholesale used car prices dropped by 1.3%. While the percentage may not seem like much, it is the first drop in prices since December.
Wholesale prices typically lead retail by a month or two. The drop in June means buyers will see some savings around the end of July or the beginning of August. Shoppers who can hold off buying for another month should wait it out to benefit from this drop in prices.
The market has been volatile over the last three months. Sales soared in spring and are now declining over the summer. Trade-in prices soared, encouraging new-car shoppers to fill in used inventory. This surge could mean lower costs in areas with high trade-in volumes.
There are still ways to get a fair price for a used car
The demand for used cars is high as inventories are at all-time lows. This is a seller’s market, and buyers need to have a strategy to get the best possible deal. There are some strategies used car shoppers can use to avoid paying inflated prices.
Private sales lack some of the protections of buying certified pre-owned, but they can spell huge savings. Avoiding dealerships means avoiding markup and fees. Budget-conscious used car shoppers should consider a carefully researched peer-to-peer sale.
When dealerships are the only option, there are still some ways to save. Choosing a less popular alternative can shave a little off the sticker price. Consider an older model, which is typically priced lower than a newer option. The age-old advice to buy in cash for a haggling advantage may see results, typically at private dealerships.
The most recent wholesale pricing numbers are good news for used car shoppers fatigued by sky-high prices. The market is finally seeing a slight decline in asking prices. In just a few weeks, buyers may see slight relief from current inflation.