Prices for used cars are at a four-year low, and poised to drop even lower, car experts say. The reason: Americans are finally buying new cars, and their trade-ins are adding supply to what had been a tight market.
The average price of a used car dropped 2.8% in the third quarter to $15,678 from $16,134 the quarter before, according to the used-car market report from car-comparison site Edmunds.com.
The last time the third-quarter average was this low was in 2009, when the price was $14,808. The average used-car price has been higher than $15,000 since the end of that year.
After the financial crisis, Americans pulled back on trading in their cars, so while the demand for used cars was high, the supply was not. This drove up the prices, pushing some would-be used-car buyers to buy new, because the difference in price was smaller than normal. Used-car prices peaked in the second quarter of 2011 at $16,473.
“Now that the new car market has hit its stride, buyers are no longer drawn to used cars the way they have been in recent years,” said Joe Spina, Edmunds.com’s director of used car analysis, in a news release about the report. “Used car prices will likely continue to decline in the coming months simply because there will be more of these vehicles sitting on dealer lots.”
Volvo, GMC and Chevrolet vehicles sat in dealers’ lots longer than other brands in the third quarter, and shoppers may see lower prices for those makes. Conversely, Honda, Toyota and Lexus vehicles were the most popular.
If you have a low credit score, used vehicles may be the way to go when it’s time to purchase a car. It’s easier to qualify for used-car financing, and while lenders have slightly lowered their standards for financing during the past few months, it’s smart to go into the shopping process with an idea of where your credit stands.