If you’re shopping for a car right now, then I’ve got some bad news for you: this is not a buyer’s market. I know that if you really need a vehicle, then you really need a vehicle, but overall this is a pretty rough time to shop for a car. More than ever before, it’s vital that you do some research, figure out what you need, take your time to see what’s out there, and always shop from a place of reason rather than emotion. That’s easier said than done, of course, but the more you know about what’s available, the better.
Today, I’m going to take you through some important things that you need to know right now if you’re shopping for a car. When you look online for suggestions or buyer’s guides, you’re going to find a lot of dated material that really doesn’t reflect the situation at the moment. A year ago (even a few months ago), I would’ve said, “Shopping for a used model is a great way to save a lot of money and skip out on depreciation for a vehicle.” But right now, that’s not really the case – so you need to know what’s happening in the current market.
Thing #1 – New Models Are Scarce
All you have to do is head to a dealership or pull up a dealer’s inventory on their website to see this for yourself. For the most part, new models have become pretty hard to find – even many large dealerships are having difficulty keeping much of a new inventory in stock. That doesn’t mean you won’t find anything, but the pickings will be slimmer than a few months ago.
Part of this is due to plant shutdowns last year – especially since the demand was high and a lot of companies had great sales. The other big part of this is the chip shortage you’ve probably already heard about, which has been hitting the auto industry for several months already and probably won’t end until sometime next year. So in the past, you would’ve found a few dozen of each new model at your favorite dealership, but now you might only find a handful available with few options to choose from.
Thing #2 – Used Models Are Expensive
Due to the scarcity of brand-new options, used vehicles have become more expensive than they’ve been in a long time. How much more expensive? Well, a major website that tracks prices on used vehicles found more than 70 models from the past few years that recently sold at auctions for prices higher than their ORIGINAL MSRP! You could’ve bought a 2019 Toyota Tacoma SR for less than $29,000 when it was new; now, dealers are paying $30k for them and then selling them to customers for more than $33,000!
Even vehicles that aren’t selling for more than they originally cost (which is still insane to me) are priced higher than they were previously. General inflation has been on the rise lately, and in May, the increase in the cost of used vehicles accounted for one-third of overall inflation. Used car prices went up 10% in April and more than 7% in May – the average cost of a used vehicle in June was more than $26,000, according to Edmunds. So while a used model might still be technically less expensive than one that’s brand new, that’s not always the case, and you can end up paying more for a vehicle than the person did who bought it as new.
Thing #3 – If You Can Sell or Trade-In, Then Do So
As I said earlier, this isn’t a buyer’s market, but it’s definitely a seller’s market. If you have an extra vehicle or one that you want to use as a trade-in, then this is a good time to act. Dealerships are desperate for used vehicles right now (high-quality options are especially in demand, but they’ll honestly take just about anything), and you can use this to your advantage. As we saw above, you might be able to get close to or even above the original sticker price for your car.
Just remember, however, that if you’re selling or using a trade-in and you need to buy a vehicle, then you’re going to be at the mercy of high sticker prices. If you have a car and you want to sell it to buy another car, you’re not going to get much benefit from the sale since you have to buy in this rough market. This is a really great opportunity if you’re in a situation where you have multiple vehicles for your household, and you’ve been considering downsizing. If you can do that, then selling your extra vehicle right now is going to be a great move (bear in mind, I’m not a financial advisor, and this is not professional financial advice).
Thing #4 – Used Prices Might Be Leveling
The good news for anyone shopping for a used car in the next month or so is that prices seem to be leveling off. As I said, prices of used cars went up 10% in April and another 7% in May, but in mid-June, the price of used cars went up only 0.75%, and for trucks and SUVs, they increased only 0.68% in one week. That’s still an increase, don’t get me wrong, but those are the lowest weekly gains for used vehicle prices in the last four months.
In other words, the insane skyrocketing of used car prices might be reaching its peak and coming to an end. Unfortunately, that doesn’t mean it’s about to go back down – a lot of people don’t expect that to happen until the shortage of new models comes to an end. So we might not see pre-COVID pricing until sometime next year, but at least the surge may be ending.
Thing #5 – Skip Extra Features You Don’t Need
The initial burst in used-car pricing struck high-end vehicles and those in high demand, models like the Ford F-150, especially the Raptor, and the Jeep Wrangler. High-performance SUVs and cars were very sought after, and the top-selling vehicles were the first to become much more expensive than people expected. So if you really don’t need one of these models, then skipping them in favor of something a bit more practical can help you save money.
Unfortunately, the rise in pricing has reached other, practical or less-desired models too, so even smaller trucks or less popular SUVs can still be pretty expensive. If you can skip out on higher trims and models with lots of bells and whistles, you’ll be more likely to find better prices. But even mainstream models and low trims are surging in price, so there’s really no ideal option – just better options.
Thing #6 – Act Quickly, But Not Recklessly
Since new models are scarce and used vehicles in good condition are in high demand, finding the right car, truck, or SUV can be trickier than in the past. If you find something that’s a good fit with everything you need, then you shouldn’t delay too much to snatch it up since it probably won’t sit around for very long. That being said, the last thing you want to do is rush and make the wrong decision on a major purchase like a vehicle. The sweet spot here is to not make a decision based on panic or pressure from a salesperson, but don’t hesitate if you know that you’ve found a vehicle that meets all of your needs.
