Is The Used Car Market Finally Cooling Off?

Most of the time, in automotive history, buying a used car made good financial sense. Is the used car market finally cooling off after the COVID-19 pandemic?

Usually, buying a used car that’s three to five years old means most of the depreciation has been taken and you can expect to get a great deal. The COVID-19 pandemic threw everything out of sorts in the automotive market. Many used vehicles were being sold at prices that were higher than when the vehicle was new, and dealerships were struggling to keep inventory in stock.

Have things cooled off? Let’s discuss.

The supply and demand are finally leveled

When either the supply or the demand is out of whack, prices will go up or down. When there’s a limited supply of any product, that product is much more expensive than it would normally be. On the other hand, when the demand is limited but the supply is high, prices typically drop. The pandemic caused automakers to cancel orders for necessary parts, and when they began to reorder those parts, they weren’t available. This mostly applied to semiconductor chips, which are also used by many consumer electronics products.

Is a full recovery expected this year?

At the beginning of the year, Consumer Reports showed that used car prices had dropped from pandemic highs. That doesn’t mean prices are back to the pre-pandemic levels, and they might never be at that point again. Much of the market still suffers from low inventory and high interest rates, and until these issues are corrected, the used car market won’t make a full recovery. Still, with prices coming back down, many shoppers might find used vehicles much more attractive than new models.

Are used car prices at a new normal?

Don’t expect to see prices of used cars dropping again anytime soon. the short supply seems to only become shorter. Additionally, as late-model cars become part of the used market, they will demand a much higher price than previous vehicles. The added technology that goes into modern vehicles calls for much higher prices.

The hybrid/EV impact

Hybrid and electric vehicles are generally more expensive than traditional gas-powered variations of the same car. This means those vehicles will be more expensive when sold as used models as well. You can expect the added tech and variety to simply continue the climb of prices of used vehicles for several years to come.

Can you still get a great deal on some vehicles?

If you want to get the best deal on your next ride, it should be a vehicle that isn’t in high demand. That’s often hard to fathom because you might want to drive a truck or luxury SUV, which are the most in-demand segments right now. If you choose a hybrid, minivan, or sedan, you should find prices to be much better than on the in-demand models. That’s how supply and demand go in any industry.

Is the used car market tariff-proof?

The yo-yo effect of threatened tariffs from the Oval Office can be exhausting, but it’s important to understand how they could impact your purchase of a used car. Initially, used cars won’t be impacted by tariffs, but that doesn’t mean prices won’t increase. We are back to the supply and demand scenario. If automakers aren’t making new vehicles because of the tariffs, or the prices of new models are too high, many shoppers will turn to the used car market. This will immediately cause prices to soar, making it even more challenging for some drivers to choose a used vehicle.

What should you do?

If you think you will need to buy your next vehicle sometime in the next 18 months, you might want to make that purchase soon. The tariffs will throw things into flux and cause used models to be more expensive than they are now. The prices of used vehicles have dropped significantly over the past few years, but that doesn’t mean you should expect that to continue.

The used car market is typically stable and trustworthy, but several recent factors have changed the historically predictable world of used cars. If you think you might want to buy a vehicle soon, you might want to do so much sooner rather than later. If you aren’t going to buy your next ride soon, make sure your current vehicle is up to date in terms of maintenance and care; you might end up driving it for much longer than you originally expected.