It wasn’t all that long ago that you could get a decent vehicle for quite a bit less than buying the same car in the new version. You’d still have some of the same features and accessories, but you wouldn’t be dealing with paying higher car payments. However, used car sales are costing more as the effects of the pandemic are felt.
What’s worse, the prices are getting so high that they’re almost as expensive as a new car, according to Cars. Some have even surpassed the cost of a new car. What’s going on with the used vehicle market?
What’s happening with used car sales?
Before the pandemic, financial experts would encourage you to bypass buying a new car due to its high prices and large depreciation once you drive it off the lot. Instead, you are told to consider going to the used car market to find your next vehicle purchase because you could ultimately save thousands of dollars.
However, this year, the situation is pretty much reversed. Car buying on the pre-owned car lots is becoming more expensive than getting a new one. A lightly used vehicle for a 2020 model averages only $2,000 less than the median price of a brand-new vehicle. If you look at a 2018 used vehicles, it was a little over $8,000 less than the 2019 models that were new at the time.
For some vehicles, it would cost more used than what you would buying new. Kia Telluride is around $3,000 more in the used car market. A brand new one would go for $44,166. The same goes for the GMC Sierra 1500. A pre-owned one is priced at $57,671, which is an increase of 6.4 percent.
Why has buying become so expensive?
It all boils down to the chip shortage seen amongst many industries, including the automotive arena. Without enough supply, some parts needed for certain cars aren’t getting produced, which means vehicles have to go on a production pause until they can build them.
With more cars absent from the lineup, the car dealerships are dealing with less inventory to sell. Car buying hasn’t slowed down, though. Consumers are still looking for vehicles, so they’ve turned to the pre-owned car market to find their next purchase. The more people buy used vehicles, the more they drive the prices up for pre-owned ones.
However, not everyone is turning to used cehicles. Some people take advantage of the price wars by selling their own vehicles or trading them in for a nice profit. Then they go to the dealers and purchase something brand-new that’s on the lot. With less inventory of new vehicles, most dealers fill up their spots with used inventory instead.
What is the outlook for buying going forward?
Since most of the problems we see in the automotive industry are caused by the shutting down of factories for coronavirus (COVID-19) safety, you can pretty much bet production of new car sales will continue to be slow. As these manufacturers have opened up, it’s now more of a catch-up phase.
According to KIRO7 News, dealers are focusing on getting used vehicles on their lots that they know will sell quickly. But, in doing so, they end up taking a hit in profits to keep the business going. Getting those pre-owned vehicles is cutthroat because they end up in bidding wars against other dealers, and the auctioned cars go for way more than they used to.
If production picks up and newer cars start rolling off the lines and onto dealership lots, we could see prices begin to drop. It won’t likely happen quickly. In the meantime, try getting a good deal on the model that’s caught your eye. The dealer might be willing to offer more for your trade-in to get it on their lot.