Have you thought about purchasing a vehicle in the next five years? The process of buying a vehicle may seem easy to some and frightening to others. This article was written to educate the reader on the used car industry and to guide you in the decision-making process of purchasing a vehicle.

The Used Car Industry

The average used car price has increased $10,000 since before COVID-19. In today’s market, the average price for a used vehicle ranging from one to three years old is listed at $42,314. A thirteen-year-old vehicle has an average sales price of $18,038. As the supply of new vehicles post-COVID dropped significantly, according to CNBC, prices for used cars have shot up. New car production was slowed down due to the lack of computer-chips for a while, which also made used cars shoot up in price as those were what was available.

Things to consider before buying a vehicle:

• Budget – Ask yourself how you intend to pay for the vehicle? Do you plan to finance the car through a dealership or pay for the car in full? If you plan to finance the vehicle, specify the details of the loan that you’d like to obtain. If you plan to pay for the car with cash, walk through how you plan to get the cash. Before purchasing any big-ticket item, ask how this purchase will affect your day-to-day life?

• Type of Vehicle – As previously stated, the car industry has substantially increased in price over the last two years. Research the price of the car you want. Research gives you power, and you can use your knowledge to negotiate with the dealers on a lower sales price. As you’re searching for a vehicle, remember that the make and model of a car contributes to the sales price. For example, SUVs are typically listed higher than sedans and coupes. Electric vehicles are also on the higher part of the scale, as the average sales price of a used car is $66,742.

• Research the Market – Once you’ve determined the make and model of the vehicle you’d like to purchase, research vehicles of that model that have been at the dealership for 60+ days. The longer a vehicle has been at the dealership, the more negotiating power you’ll have.

• Financing – As a buyer, you will have more leverage and negotiating power if you arrive at the dealership with a purchasing plan aside from financing through the dealership. Dealerships profit off financing. Therefore, if you could seek automobile financing through your local bank ahead of time or pay for the vehicle in cash then you will greatly improve the process of negotiating for the desired vehicle.

We are in a very interesting time where the market makes it somewhat difficult to buy a car right now. Zach Shefska, co-founder and CEO of YAA, an advocacy website for car buyers, recommends buyers wait to purchase a car since the prices are going to remain high due to low inventory. If purchasing a vehicle is a desired purchase then the tips above should be considered, as it may save you money.

Resources:

Holzhauer, Brett. Select. 17 September 2022. <https://www.cnbc.com/select/should-i-buy-a-car-right-now/ >.

White, Emmet. Autoweek. 20 July 2022. <https://www.autoweek.com/news/industry-news/a40690607/average-used-car-price-is-now-33000-dollars/#:~:text=Data%20shows%20that%20used%20cars,premium%20above%20normal%20pricing%20levels >.