SEARCHING FOR THE ELUSIVE $7K USED CAR
I remember when $7,000 used cars were a thing… six months ago! They were for sale in front yards and used car dealerships everywhere and it seemed they would be around forever! Hey, for $10,000.00 – $15,000 you could drive away in something amazing! People, I never thought I’d say this but they may be gone for good. The average transaction price for a used car was $25,410 in the second quarter of 2021, up from $22,977 in the first quarter and 21% year-over-year, according to data from online automotive resource Edmunds. That figure marks the highest average price over a quarter for a used car that Edmunds has ever tracked. In June of this year the average used car price leaped $7,583. The new average cost of a used car is over 33% higher than a year ago, it’s time to reevaluate our expectations. Read more about THE CAR BUBBLE.
The average cost of a new car in 1990 was about $9,500. This means after the first year’s depreciation (20-30%) and subsequent year’s (16-18% annually) we might buy her used in 1995 for around $2,000.00 – $3,500.00. The average price of a new car in 2020… $37,000. Over the next 5 years that car loses around 60% of its value. If you don’t have a calculator handy that puts the price at around $14,500.00 used. Today we can add about $7,000.00 to that number bringing our estimated cost for the five year old car to $21,500. Expect that number to be higher depending on condition and mileage. Chip shortages, labor problems, and general industry chaos can be held responsible for the blight on our $7,000.00 used cars.
There Is A Bright Side
Quality: New car quality has increased and is still rising, they simply last longer. They’re still kicking like a mule at eleven plus years. This means that a five year old car has a long life ahead of it and the owner knows it. It’s price will reflect its longer life.
Supply and demand: Used cars are practically non existent these days compared to just a year ago. Increased SUV, truck, and crossover sales in recent years has led to less small, inexpensive vehicles on the used market and less means more for private sellers. With less inventory on the market, there is less competition and this is powerful leverage for sellers so if you have an extra, consider selling at a profit.
Not As Bright
Larger more expensive vehicles: The COVID collateral damage? Higher end cars with more options are being produced for solvent buyers, shrinking the affordable used car supply. Since you’re not likely to find many of them for sale, they come at a premium. If you do find an inexpensive used car in great shape, move fast, it won’t be available long!
Are there any cheap used cars out there worth buying?
Of course there are, just increasingly harder to find. Best bet is to purchase from family or close friends that can guarantee the car’s history. 150,000 plus miles is fine as long as the car has been properly maintained and loved. Otherwise it’s anyone’s guess how long the car will last. Dealers can’t sell what they don’t have and there are so few of these rare birds available that dealers can’t find them either. The discerning used car dealer has a reputation to protect and must have a reasonable amount of confidence in each used car they sell. Oftentimes cheap is just cheap and that doesn’t meet inventory standards.
The New Standard
What should you expect to pay for a reliable, well maintained used car today? For the features that most of us want with 60-80k miles you can expect to pay on average around $19,000-$23,000 for your 4 to 5 year old used vehicle. Yes, there are exceptions both higher and lower depending on the car and condition specifics but buyer beware, if it’s cheap it’s a heap! Have questions? Call or text (757) 560-4252 and ask for Mike Love, I have answers. Happy hunting folks!
Frio, Dan “Cheapest Used Cars” EDMONDS.COM December 10th, 2019 Web. Retrieved from: https://www.edmunds.com/vehicles/cheapest-new-cars/
Edgerton, Jerry “Cars Now Last Longer Than Ever.. Will Yours” CBSNews.com August 7, 2015 Web. Retrieved from: https://www.cbsnews.com/news/cars-now-last-longer-than-ever-will-yours/
Mattone, James “Used Car Prices at Highest Levels in Three Years” media.thinknum.com August, 2019 Web. Retrieved from: Mahttps://media.thinknum.com/articles/used-car-prices-are-at-highest-levels/