The Surge in Used Car Prices on Car-Buying Sites, Explained

Used cars are thousands of dollars more than they used to be. In fact, the prices for used cars jumped more than 10% in the June of 2020. And, it'll be a while before those kinds of prices come back down.

So, we could be seeing inflated prices for years after the pandemic of that year.

But, why did this happen? How did the pandemic cause a surge in used car prices on car-buying sites? After all, not very many people were buying cars while they were stuck at home.

To learn what happened to the used car market during and after the pandemic, keep reading. We've brought together all of the information you need to know.

How Bad Is the Surge in Used Car Prices?

The price for used cars was astronomical during the pandemic. Prices continued to surge throughout 2020 with shortages in microchips and delayed production.

The microchip shortage indirectly affected the prices of used cars. Because of the decline in the availability of microchips, manufacturers had to stop the production of new cars. Thus, the incoming supply of new cars stopped and prices soared.

As consumers began opting for used cars, the same problem came to the forefront of the industry. More and more demand for used cars caused an increase in price.

At the same time, the supply of incoming used cars also stopped. Since new cars weren't available at a reasonable price, people stopped selling their used cars at the same rate as before. So, the supply of used cars also decreased.

So, the industry ended up with a shortage of both new and used cars. And, prices skyrocketed for all cars in response.

Now, car dealers are left with half-empty lots and unsellable cars.

What Are the Current Used Car Prices?

Sellers are pricing used cars based on their conditions. However, because of the shortage of new cars, the prices of used cars are more skewed than normal.

For example, a lightly used car is now closer in price to a new car than the average used car. In fact, lightly used cars are going for thousands more than other used cars.

This is because these are the closest that buyers can get to a new car in the current market. And, some people are willing to pay just a little bit less for a lightly used car to save some money.

Although, you should keep in mind that prices are high no matter what kind of car you're buying right now. Even though lightly used cars are a little cheaper than new cars, the prices are still high. And, lightly used cars are usually more comparable to the prices of other used cars rather than the prices of new cars.

In terms of specific pricing, we see five-year-old vehicles selling for an average of $24,000. This is a price of more than $6,000 than the year prior.

When Will the Used Car Market Go Back to Normal?

As we've covered, there are two main problems to overcome if we want the used car market to go back to normal:

1. The microchip shortage

2. The new car shortage

Naturally, solving the first problem is going to help us overcome the second problem. But, there will be a delay between replacing microchips and getting a larger supply of new cars. Once microchips become available, it will take car manufacturers time to get those microchips and start making new cars.

Since these factors may take months to repair themselves following the pandemic, it may take months for the used car market to go back to normal. In fact, some experts estimate that used car prices won't go back to normal until mid-2022 or early 2023.

If you're in the market for a car, you should wait at least six months. If you can, it'd be even better to wait a year.

If you wait six months, you'll be able to outlast some of the current demand in the market. Therefore, you'll be able to get a slightly lower price on the car that you're looking for. Although, the price will still be

By waiting a year, you're avoiding the ridiculous prices that are currently plaguing the market. And, you may be able to take advantage of some dealers who are looking to get rid of older models.

It's important to note that the used car market can't and won't recover overnight. Even if the pandemic ceases to exist, the market will need time to rebound from the loss of supply and resulting inflation. Again, this could take several months.

What Needs to Happen for the Used Car Market to Go Back to Normal?

Before consumers can start getting better prices, car-buying sites, dealerships, online car auctions, and other sellers need to get their supply. The price can't start going down until their supply is greater than their demand.

We should also note that used care prices depend on new car prices. The price for used cars can't come down before the price for new cars comes down.

When prices do start coming down, you shouldn't wait for any great sales. It's not likely that dealerships are going to make great offers for a while after prices go back to normal.

Remember, these high prices are hurting them, too. They may be making more money per car they sell. But, they're not making as many sales as they would be with the prices that cars are going for.

So, it's more likely that car dealerships are going to focus on replenishing their financial wellness before creating any great blowout deals.

How to Buy in the Inflated Used Car Market

If you can't wait six months or a year to buy a new or used car, you aren't completely out of luck. You may be able to spin the inflation to your advantage.

Here are a few tips for navigating the market before it returns to normal in the next few years.

Consider Trading in Your Old Car

As most people are looking for a new car, they're also looking to sell an old one. Unless your prior vehicle is totaled or unusable, you should see if you can get any money on a trade-in deal.

And, since used cars and new cars are so scarce right now, you may get a better deal than you would normally. This means that you may make more money off of your trade-in now than you would've in the conditions before the pandemic.

Car dealerships are looking for cars to add to their lot. Even if there are a few things that aren't perfect about your vehicle, they may be willing to take it in if their inventory is hurting for more vehicles.

Many people who have traded in their cars have found that they can use the extra money that they make on their trade-in. It isn't quite enough to help them invest in a new car, but it can help bridge the gap that inflation formed between previous prices and current prices.

So, if you're going to trade in your vehicle, now is the time. The price of obtaining another one is a little higher, but you may be able to make up the difference depending on your trade-in value.

Buy a Vehicle That You're Going to Keep

Whether you're looking for a new or used car during this time, you should be aiming for longevity. You want to get more than a few months or years out of this vehicle, especially if you're going to pay these high prices for it.

As you're searching for your vehicle, you want to look for clean records and minimal prior issues. If the vehicle that you're looking at has several prior accidents, there may be some underlying issues that you don't want to have to fix.

If you can find a vehicle that has a relatively clean history, you should be able to care for that vehicle for years to come. And, if you can keep the car in great condition, you can minimize the depreciation on the vehicle while minimizing the repair costs.

It's also important to consider the kind of car that you're looking at. Individual car histories matter, but a brand's reputation matters even more.

Don't waste your time looking at cars that aren't made to last. Even if you find a car that's in mint condition, it's more likely that it's just a matter of time until the vehicle starts going downhill.

Lastly, we want to point out the fluctuations in the market. If you're buying while the market is high and you buy a car that isn't going to last, it's likely that you're going to sell in a market that's low. A low market has its advantages, just like those that we've discussed with the high market, but you aren't going to come across any advantages as a seller.

If you buy in a high market and sell in a low market, you're more likely to go underwater on your loan. This is because you'll actually be losing more money on the car than indicated by the vehicle's depreciation value over that amount of time.

With this in mind, you want to try to keep your current car until the next high. If you can't, you should hold on until the next lull in pricing.

The market is continually fluctuating. So, if you wait long enough, you'll be able to enter into the next high in the market eventually. This way, you can trade in your car under the same circumstances as to when you bought it.

Invest in a New Car

Most people who are investing in a car opt to buy used. Usually, it's a sure-fire way to save money. This is especially if you're planning on changing cars in a few years.

However, the car market is anything but normal right now. And, you might actually save money by buying a new car.

If you were to buy a used car in this market, you would save a few thousand as compared to a new car of the same or similar quality and brand. These thousands of dollars that you save may seem worth it to buy used.

But, you could actually be losing money.

If you're buying a used car as opposed to a new car, you're opening yourself up for repair costs. Over time, these are going to be worth more than the few thousand that you're saving on the car. So, if you opted for the used car, you're going to end up spending more over time, even if it's in great condition when you buy it.

The Deal With Barely-Used Cars

If you're someone who likes to find loopholes, you could consider buying a barely-used car. These are cars that have been driven off the lot but didn't spend much time with their previous owners. Some barely-used cars only have a couple thousand or even a couple hundred miles on them.

This may seem like a great in-between option. It allows you to save a few thousand dollars since it's used, and you'll also save money on repair costs because it's relatively new.

But, this isn't exactly how it works in today's market.

First off, finding a barely-used car right now is going to be extremely difficult. The used car market is low in supply, and barely-used cars are one of the first ones to go.

On top of that, barely-used cars are going for similar prices as new cars. Because the supply of new cars is so low, many dealerships are considering barely-used cars to be new cars. So, their prices aren't differentiated much at all.

All in all, you may be able to save a couple hundred on a barely-used car. But, is this worth the couple thousand miles that the vehicle has on it? And, is it worth losing the package that usually comes with a new car?

Don't Be Picky

If you're trying to find a car - new or used - in this market, you can't be picky. If you're trying to find a particular make, model, color, and/or year, you're going to lose a lot of negotiating power in the dealer's eyes.

Remember, a low supply of both used and new cars means a low supply of the specific kind of car that you're looking for. In fact, you could even say that some cars are scarce in this market.

With that in mind, you need to widen your list of preferences. You're not likely to get your dream car unless you have a ton of cash stashed away somewhere.

So, you should think about the car that you're looking for and find models and makes that are adjacent to that.

And, you should make sure that you're taking the time to meet with multiple dealers in multiple locations. If a car is scarce, you're not likely to find it at the first dealership that you go to. And, even if you do, it may not be the best price out there.

So, take your time to shop around and find the best deal. Even if you have to drive a little bit to find the car that you're looking for, it may be worth it in the long run. This is especially if the drive saves you a few thousand on the vehicle.

Check the Leasing Contract

Leasing a vehicle isn't usually the best option for those who are looking to buy a car, whether it's new or used. But, it could save you thousands of dollars.

If your lease runs out while the value of used cars is high, you're in the perfect position to have a lease.

This lease contract is the document that states the residual value that the buyer can buy the vehicle at once the term ends. Since the residual value is set before the market fluctuates, it's likely that you could save thousands if you land on a market high.

In other words, a lease contract that you buy during a low or a lull in the market could set a very low residual price. If that lease ends during a high in the market, you're going to end up saving thousands of dollars on that vehicle. The residual value is going to be much lower than the market in this case.

Usually, leasing contracts are very risky. But, just like with other kinds of risk, there are certain scenarios in which the risk pays off. And, this is one of them.

If you signed a lease on a vehicle two to three years ago, it's likely that your lease is almost up, meaning that you can take advantage of a much lower price than anyone else can get their hands on in this market.

The Bottom Line

The current market right now is absolutely crazy. As you've heard many times, it's unprecedented.

But, even in an unprecedented market, a few things still hold true.

First, car sales are going to remain hot in the summer and cold in the winter. This means that waiting to buy your car may save you a lot of money. Even if you can hold off a few months from now, you could be saving a few thousand dollars.

Second, borrowers are going to get the most out of lower, shorter loans. So, you should aim for a high downpayment on the vehicle and a shorter-term loan.

By aiming for a lower, shorter loan, you're going to pay less in interest. And, you'll have the vehicle paid off faster.

To calculate how much your loan may cost, you can use our auto loan calculator.

Third, you should always know the market value of the car that you're looking at. No matter what the market looks like, you should be able to sound off the price of the vehicle that you're looking for.

If you're not informed about the true value of the car that you're looking at, it's likely that the dealer is going to take advantage of that. This could mean that you'll end up overpaying for a vehicle that is already at a high price in the current market.

Lastly, a more expensive car doesn't equal a longer-lasting car. If you're trying to find a car that's going to last a long time, you shouldn't reach for the most expensive car on the lot.

Instead, you need to focus on the actual specifications and details about the car itself. You shouldn't depend on the 'value' that a car company gives the car.

With this, it's also important to note that more expensive cars tend to have more costly upkeep, too. You'll end up paying more for gas, repairs, oil changes, and more.

So, again, avoid the more expensive car (unless it's that dream car that you've been saving up for years). If you want to buy a sports car or something else like that, you should wait just a few more months so that you can save some money.

Auto Transport for Car-Buying Sites

The coronavirus pandemic has absolutely changed the face of the car market. And, some experts think that we're going to be feeling the financial alterations for years to come. This means that car-buying sites, online auctions, dealerships, and other car sellers are going to be scrambling for new and used cars for a while.

This also means that buyers are going to be paying more than they should be for both used and new cars.

Because of all of the fuss over the car market, sellers and buyers are scrambling to get the supply that they want and need. Luckily, that's where we come in.

Our auto transport services are essential in a time like this. Whether you're a buyer or a seller, we can help you get your cars where they need to go. And, even better, we work with everyone: individuals, dealerships, car auctions, car-buying sites, and more.

So, if you need auto transport, don't hesitate to give us a call. We can help you get your hands on the vehicle you've been looking for.

Used cars are thousands of dollars more than they used to be. In fact, the prices for used cars jumped more than 10% in the June of 2020. And, it'll be a while before those kinds of prices come back down.