There’s finally some good news if you’re in the market for a used car: Prices are at roughly their lowest point in three years.
Used vehicle costs have dropped by more than 5% over the past year as the market normalizes in the aftermath of a supply crunch that caused prices to soar.
Still, used cars probably won’t seem cheap to buyers. The latest government inflation data shows that used car prices have increased more than 25% since 2019. But the recent decline is a “promising sign,” says Rebecca Lindland, senior director of industry data and insights at Cars Commerce, the parent company of Cars.com.
“We’ve seen this broader drop in used-car pricing thanks to gradually improving used-car inventory,” Lindland says. “However, pricing will remain elevated as used inventory recovers from the pandemic.” (According to their data, the average used car costs nearly $29,000.)
High interest rates for used car loans are also deterring buyers from shopping in this market. With the current rates, the total costs of buying a used vehicle aren’t much cheaper than they were a year or two ago.
“From the point of view of just headline vehicle prices, they’re definitely getting more affordable, but when you think about it as an all-in cost, I don’t know if consumers are feeling that much relief yet,” says Kevin Roberts, director of industry insights and analytics at CarGurus.
How to save money buying a used car
Shoppers are looking for ways to save money due to these challenges. Here are some tips to navigate the used car market and get a good deal this summer:
Expand your used car search
The supply of used vehicles has decreased slightly in the past year, falling 3%, and availability is well below the normal level, according to Cox Automotive data.
To find a good deal on the car you want, it can help to search across a wider geographical area than you may be used to. Online sites like CarGurus and Cars.com make it easy to search listings from multiple dealerships in your region.
Roberts says expanding your search area “increases the pool of vehicles that you can find and might be able to find you some more attractive price points as well.”
Depending on your priorities, you may want to include private seller listings in your search. Private sellers typically offer vehicles at lower prices, but one of the downsides is you won’t receive a warranty.
When dealing with private sellers, consider having a mechanic inspect the car before you close the deal, and be sure to review the vehicle history with a tool like CarFax.
Expand your choice of vehicles
The best used car deals are typically available on vehicles that are not in very high demand, as dealerships will price cars more aggressively if they’re sitting on their lots for a long time.
While popular cars are popular for a reason, there may be a vehicle that suits your needs that’s undergone more depreciation due to less popularity.
In recent months, used electric vehicles in particular have depreciated much more quickly than other types of cars, according to iSeeCars.com.
Set realistic cost expectations
Because prices rose so much during the pandemic, used cars shoppers who haven’t been following the trends could be in for some serious sticker shock as they start their next vehicle search.
Popular vehicles in short supply are not depreciating as much as you might think. A five-year-old Toyota RAV4 with 50,000 miles, for example, will likely be listed above $20,000.
That’s way out of budget for many used car shoppers. For reference, CarGurus recently observed a 26% year-over-year increase in searches for vehicles priced under $10,000, according to a mid-year report.
If you’re on a tight budget, it’s important to set realistic expectations upfront. Prearrange financing so you know what you can afford, then go out and try to find a car that’s in that budget.
You’re probably not going to find a used car under $10,000 at a franchised dealership, but there are plenty of options at used car lots if you’re willing to drive an older car or something with more mileage.
Negotiate for a lower price
Used car shoppers have leverage in the current market because demand is low due to high auto loan rates. That means shoppers should try to negotiate for a lower price.
The end of the month may be the best time to work out a deal because salespeople are often trying to meet monthly quotas. For new cars, the end of the month and the end of the quarter are considered the best times to shop. If you’re shopping for a used car at a dealership, it’s just the end of the month that matters, according to Pat Ryan, CEO of the car shopping app CoPilot.
Regardless of how and when you’re shopping, you should compare the car you’re buying with comps that have similar features and mileage.
Looking at other online listings will give you a sense of the fair price for the vehicle, and you can use that information to make sure you’re not overpaying. Even if you find the car you want, don’t be afraid to walk away and continue searching if the price isn’t right.
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