Are used cars cheap this summer?
Traditionally, drivers love used vehicles because of their low prices. But as inflation continues to rise and car prices slowly normalize, buying and selling used cars is not what it used to be.
Although prices are down, it's not a particularly cheap time to run to a dealership as high interest rates continue. But if you really need a car, this summer might be the time to buy used cars.
Are used car prices going down?
The cost of buying a used car is lower than it was a year ago, but it's still too expensive for some drivers. Cheap wholesale car prices don't always disappoint the consumer, as many factors determine what you'll pay for your next set of wheels.
The price of getting behind the wheel of a used car was near a record high in late June, according to Kelley Blue Book. Drivers who made purchases spent more than $27,000. That figure is less than the cost of purchasing a new vehicle, which is over $49,000 in the same month, but it is still too much for many drivers.
Fortunately, experts predict that prices will drop soon. The price that car dealers spend in auctions has reached a low level recently. Less money spent on auctions means lower retail prices charged to drivers. Wholesale auction prices were 10 percent lower than in the same period last year, according to the Mannheim Used Car Value Index.
But some drivers can hold more brakes than others. For example, pickup trucks and vans fell by just 6.2 percent and 7.8 percent, respectively, while other types of vehicles fell by 12.5 percent.
The supply of cars is still low
One of the main factors keeping prices high is the fact that the supply of cars remains tight and below normal levels. Fewer new cars were produced during the pandemic due to supply chain issues, which means there are now fewer lightly used vehicles on the market.
Based on simple supply and demand, fewer cars available means higher prices. According to Cox Automotive Auto data, 30-day retail sales are down 3 percent from the same period last year.
But according to an analysis of Motor Intelligence data shared by Cox Automotive, the market for people who buy certified used cars is larger than the 2022 average and is expected to reach 220,000 in monthly sales. Manufacturers and dealers are recovering inventory losses by certifying older, used cars.
The average mileage for used cars has increased
Another factor that has come to the fore since used car prices have returned to more or less normal levels is the rise in average vehicle mileage. According to data presented in Cox's mid-year review, the average used vehicle listed in June 2022 was $28,050 and had an odometer reading of 69,559 miles. But the averages were $27,266 and 70,568 miles, respectively, in June.
In the vehicle price range, mileage is high for used cars. This is likely attributed to the fact that fewer new cars were produced during the pandemic. As fewer cars leave the sale space for the first time, the average mileage for the entire fleet increases.
When shopping this summer, you'll likely see cars with great mileage. While this isn't all bad news, it could mean more trips to the mechanic all over your property.
Is it a good time to buy an older vehicle?
Based on the data alone, used car prices are low. In June, the average weekly listing price was 3 percent lower than it was in 2022, although still much higher than in previous years. But even with lower prices, higher interest rates will continue to make it more expensive to buy a car.
Empirical data from the first quarter of 2023 found that used buyers saw an average APR of 11.70 percent financing their vehicles. This is up from 10.26 percent in the fourth quarter of 2022 and above pre-pandemic levels. So while used car prices are lower than last year, financing this car will still be expensive.
But the drivers' outlook isn't all bleak and gloomy. According to the University of Michigan, consumer confidence was a more positive 7.9 percent in June, the best level since February and a year ago. And if you can afford to buy with cash — and avoid skyrocketing interest rates — this summer may be a good time to buy a used car.
How to Get a Great Used Car Deal
Buying a used car has the advantage of having less out-of-home expenses than a brand-new car, but there are still ways to save extra money. Keep the following tips in mind when shopping for a used car this summer.
Shop around. Not all used car options will have the same low price. Think about the vehicle that best suits your needs and budget.
Consider the EV. Although it costs more up front to buy an electric car, it can cost less over the life of your ownership.
Apply with a co-signer. If you've found your dream car but are still stuck with exorbitant prices, consider adding a co-signer to lower your prices.
Certified Pre-Owned Store. These vehicles are thoroughly inspected before being sold, though you'll pay more for the increased reliability.
Next Steps
Used prices are going down and are expected to continue to go down. Consider whether you really need a car now or if you can wait.
The best way to save money on your next car purchase, new or used, is to pay close attention to the lender that best suits your needs. Check possible fees, terms available, and the rate your credit score will qualify you for.
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