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12/03/2023 at 14:37 #46446rodgerlucero4Participant
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Used Car Prices are dropping: What That Means for Car Buyers
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Used Car Prices are Dropping What Does That Mean for Car Buyers
Used-car prices took a big fall in December, however buying a car now can remain prohibitive for some buyers.
Written by Whitney Vandiver Writer | Car ownership, maintenance of cars Whitney Vandiver writes for NerdWallet about ways car owners can reduce the cost of ownership and maintenance. She was previously a writer in the oil and gas industry, which led to her being featured in national publications as well as international magazines. Whitney began writing out of enjoyment and believes that stories that celebrate or assist the LGBTQ+ community the most satisfying to create. When she’s not writing, she’s walking, reading, and walking her Irish Wolfhound. Her home is in Houston.
February 1st, 2023
Written by Julie Myhre-Nunes,, Assistant Assigning Editor Auto loans and consumer credit Julie Myhre-Nunes is an assistant assigning editor at NerdWallet. She has been working in the area of personal finance for more than 10 years. Prior to joining NerdWallet, Julie oversaw editorial teams at NextAdvisor, Red Ventures and Quote.com. Her personal finance insight has been highlighted on Forbes, The Boston Globe and CNBC throughout the years. Julie’s articles have been published through USA Today, Business Insider and Wired Insights, among others. Email: .
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After more than a decade of prices that were too high The used-car market began to cool by a few degree in the month of December.
The trend brings some relief to car buyers. But inventories have yet to reach pre-pandemic levels, and consumers still miss the purchasing power they had in the year 2019.
Experts say that the used car market for this year will continue to improve, consumers need to be realistic about what buying a car will look like in 2023.
December saw a record drop in used-car prices
According to a report from January 2023 from CoPilot, a personalized app for buying a used car, used car prices fell in December for the sixth consecutive month, falling 8.8% since January 2022. For a better understanding, this plunge was the largest annual drop that the used car segment has seen since the end in the Great Recession in June 2009.
But they’ve still got a way to go before buyers are in familiar territory — the median used-car price still rang in at 30.1 percent higher than a normal market price.
The market is witnessing “more of a slow returning to normal than what you would call traditionally a decline,” says Joseph Yoon an analyst for consumer insights at Edmunds an online car guide. “The rates are still extremely high, extremely, and very overvalued.”
The current interest rates are a barrier to used car accessibility
One factor that has influenced the prices of used cars is the Federal Reserve’s aggressive increase in interest rates due to inflation rising.
According to Edmunds the average cost of a used-car loan increased from 8.76 percent in July to 10.25% in December. As loan rates become more expensive, consumers who finance vehicle purchases will pay more vehicle, despite lower sticker prices.
What does this mean for car buyers
Consumers who plan to purchase a second-hand car in the coming year might be relieved to see lower costs for windshields but they’ll still need to navigate an overcrowded car market. Potential car buyers should anticipate various trends when looking for a second-hand vehicle this year.
Prices are lower compared to 2022.
As the demand for cars used decreases, prices will continue to drop. Based on J.P. Morgan Research, prices for used vehicles could drop as high as 10% to 20% in 2023. If you believe that the Fed continues to increase rates of interest, the cost of vehicles will likely continue to fall in a downward trend.
However, not all cars will be priced at the same rate. Smaller cars and pick-ups have seen the smallest change in prices since January 2022, in the opinion of Cox Automotive, an auto company that collects data — while high-end vehicles and SUVs have seen the largest price drops.
Continuation of higher-than-normal ownership cost
With the price of used cars dropping and attract potential buyers, the rise in interest rates means that consumers who have to finance their purchases will likely continue to feel the strain from the market that is soaring.
Buyers of cars who take advantage of falling prices and make finance purchases in the midst of increased interest rates could pay more for cars for the duration of the loan. In addition to a higher monthly installment, they may have negative equity at the end of the tunnel and end up .
Values for trade-ins fluctuate
According to J.D. Power the firm that conducts research and data that tracked trade-ins in December, vehicles received an average value of just $786 value when they were which were sold in June. Because dealerships anticipate earning less on used-car sales the value of trade-ins will continue to decrease when compared to last year’s.
Car owners looking to sell their current cars should be prepared for lower prices than those last year.
“It’s expected to represent a substantial drop of what you’ll receive from the value of your trade-in when you were in search of an auto at the end of September” claims Terrance Gandy as the manager of used car sales for Route 44 Toyota in Raynham, Massachusetts.
Inventory levels have increased, but remain relatively low. levels
Automakers are working towards the production levels of pre-pandemics and used cars are getting more affordable, the consumer need for cars is expected to be high following the vehicle shortage of previous years, according to J.D. Power. This may reduce the vehicles for sale since more buyers are likely to purchase cars after waiting for used car prices to drop that reached their peak in September.
“Even if prices do come down,” says Yoon, “for the foreseeable future, we’re going to be a million of vehicles short on used cars.”
This will allow certain consumers gain a leg up when it comes to bargaining offers for trade-ins.
“They have a much better chance of negotiating right now since dealers need to remove these new vehicles off their lot,” says Gandy. “The ball is kind of at your disposal if you do decide to trade-in your vehicle because dealers want your car.”
About the author: Whitney Vandiver is a writer for NerdWallet currently focusing on the maintenance of vehicles and car ownership. She’s previously written about small-scale businesses and payments.
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