Posted Friday, May 19, 2023
With the spring car-buying season in full swing, many individuals are on the lookout for a great deal in the used car market. However, a recent report from car-shopping site Edmunds.com suggests that buyers may face difficulties in finding affordable options. In this blog post, we will explore the insights provided by the report titled "Used Market Enters Uncharted Territory Post-Pandemic" and shed light on the current state of the used car market. We will discuss the reasons behind the high prices, the dwindling pool of cheap vehicles, and the potential impact on buyers.
Rising Prices and Limited Availability:
According to Edmunds' research, while there has been a slight softening of used car prices, they remain historically high. In the first quarter, the average used vehicle transaction price experienced a 6.4% year-over-year decline but still stood at a significant 44% increase from five years ago. The report suggests that factors such as low lease volume, reduced trade-in volume, and fewer off-rental vehicles being sold in the used market have contributed to the shrinking pool of affordable vehicles.
Challenges for Entry-Level Buyers:
For many buyers, used cars have traditionally been the gateway to entering the entry-level car market. However, the report highlights that the percentage of used vehicles sold for under $20,000 has dropped significantly, from 60.5% five years ago to just 30.6% in the first quarter. This poses a challenge for individuals seeking a reliable and reasonably priced vehicle. As a result, what was once considered an acceptable budget of $20,000 now often leads to older vehicles with higher mileage or limited options.
Impact on Affordability and Future Prospects:
The constrained availability of affordable used cars is a concerning trend, especially for those on the lower end of the pay scale. Buyers who were accustomed to finding a good deal within their budget may find it increasingly challenging. The report suggests that $20,000, which previously offered a balance between mileage and age, now presents buyers with much older vehicles or those approaching the 100,000-mile mark.
While there is some relief for current used car owners, who have seen relatively stable values despite increased mileage, prospective buyers may face uncertainties. The article speculates that if new car sales slow down, automakers might offer incentives to move new cars off dealer lots. However, automakers have learned from past experiences and are aligning supply and demand, focusing on fewer vehicles and more built-to-order models, potentially reducing future heavy incentives.
Navigating the used car market has become increasingly challenging for buyers seeking affordable options, particularly those in the entry-level car market. The surge in used car prices, the limited availability of inexpensive vehicles, and changing dynamics in the new car market create a complex landscape. Despite these challenges, it's important for buyers to conduct thorough research, explore financing options, and consider alternative avenues such as reputable dealerships specializing in financing solutions like Buy Here Pay Here.
As the market continues to evolve, staying informed and patient will be key. By understanding the current dynamics and exploring all available options, buyers can increase their chances of finding a vehicle that fits both their needs and their budget.