Wealth Management

Used cars are older, pricier. 3 things to think about when shopping for a previously owned vehicle

Customers browse in a used car lot on Feb. 15, 2023 in Glendale, California.
Mario Tama | Getty Images News | Getty Images

As recently as 2019, used car shoppers could find a 3-year-old vehicle for about $23,000. That’s less likely today — in terms of both age and price.

Pandemic-era manufacturing issues have since increased the average age of used cars sold to 6.1 years, up from 4.8 years, according to car-shopping site iSeeCars.com, which analyzed more than 21 million used cars sold in 2019 and 2023.

The average price for all used cars sold increased 33% between 2019 and this year, rising to $27,133 from $20,398, according to the site.

More from Personal Finance:
October ‘best time to book’ holiday airfare, economist says
How girls, young women can be homeowners by age 30
2023 could be biggest year for labor activity in decades

“Plant shutdowns and limited new car production during the pandemic is still playing havoc with the used car market,” Karl Brauer, iSeeCars executive analyst, said in a statement.

To that point, 58% of sales from used vehicles came from 3-year-old or newer used cars in the second quarter of 2019. That figure dropped to 49% in the second quarter of 2023, according to Edmunds data.

The average transaction price for used vehicles in the second quarter of 2023 was $29,472, down 4.6% from last year’s record peak of $30,905, Edmunds found. While prices cooled slightly, used cars overall are still expensive; sticker prices are 46% higher than the second quarter of 2018.

“It’s really not a great time for consumers to be buying cars, whether new or used,” said Paul Waatti, an industry analyst at market research firm AutoPacific.

How the pandemic affected the used car market

Production of new cars dropped precipitously thanks to plant shutdowns in 2020, 2021 and 2022, raising demand in the used car market at large, iSeeCars found. Car rental agency woes added to the problem.

“The used car market has different supply chains, one being rental agencies,” said Ivan Drury, director of insights at Edmunds.

It’s really not a great time for consumers to be buying cars, whether new or used.
Paul Waatti
industry analyst at AutoPacific

In a typical year, rental agencies buy about 2 million new cars and then sell some existing inventory. But when people stopped traveling in 2020 amid Covid-era lockdowns, agencies thinned their fleets in the third and fourth quarter of 2020 without buying new vehicles, Drury said.

“There was no need for them to buy their normal level of vehicles,” Waatti said. “They sold off some of the older models and held onto a core amount of vehicles to get them through the pandemic.”

Rental agencies are now selling off vehicles that are about 4 to 5 years old, compared with the typical 2-year-old used vehicles that still have warranties left on them.

UAW strikes will have ‘some ramifications’

UAW members and workers at the Mopar Parts Center Line, a Stellantis Parts Distribution Center in Center Line, Michigan, picket outside the facility on Sept. 22, 2023.
Matthew Hatcher | Afp | Getty Images

Current strikes by United Auto Workers members at three major car manufacturers could also impact the used car market in the long run, as new inventory at dealerships dries up and supply chain issues cause dealers to run out of parts required for regular maintenance, Waatti said.

When people can’t buy new cars, they always look into used, especially at times like this year, when it is increasingly difficult to buy a new car, Drury said.

“People are already looking at used vehicles to save money; this just makes the problem more difficult,” he said.

Newer used cars that are coming into dealerships and need tune-ups will be waiting for those new parts for a while, Waatti said.

“There definitely will be some ramifications,” he said.

What to consider when buying a used car

Here are three considerations car shoppers should keep in mind when buying an older used car:

  1. Carefully vet a vehicle that is 6 years old or older: Find the vehicle history report; you’ll see detailed information that will let you know the maintenance and accident history, Drury said. If the prior owner took the vehicle to a repair shop or mechanic that does not report this type of data, you want them to have a “binder of information or receipts” that shows you the vehicle was cared for beyond just the norm, he added.
  2. Look into warranties: Typical warranties last for three years, Drury said. Even if the previous owner says the car still has warranty, double-check with the dealer. “If the vehicle is out of warranty, you can purchase an aftermarket warranty,” he added. However, they vary in cost and services by area because some aren’t valid in all states, he said. “Even if you’re looking at something that’s technically outside of the automaker back warranty, you can still go around that if you want that assurance, and purchase an aftermarket warranty,” he said.
  3. Get preapproval from a bank or credit union to finance the purchase:  As interest rates are also very high, try to secure some form of pre-approval beforehand from your own bank or credit union instead of using dealer financing, which is often more expensive, Waatti said. “Having the pre-approval could save you hundreds [or] thousands in the long run in your loan.”

Articles You May Like

Canada Goose jumps 16% after the company reports growth surge in China
Mercedes-Benz workers in Alabama vote against UAW union membership
Media giants lean on sports as Hollywood strikes still loom over content slates
Stocks making biggest moves premarket: Under Armour, Walmart, AMC, GameStop, Canada Goose and more
The Expense That’s Covertly Boosting Your Personal Inflation Rate

Leave a Reply

Your email address will not be published. Required fields are marked *