When Will Used Car Prices Go Down?
It isn't news to anyone who has shopped for a used car in 2022: The price of used cars has soared to record highs. According to the U.S. Bureau of Labor Statistics, its used car index, which tracks used car prices, has risen by 42% from December 2019 to October 2022. The free-market used car arena is built on the foundation that sellers can sell cars for the maximum amount buyers will pay. At this point, buyers are showing willingness and ability to pay astronomical prices. Used car prices shot from the first to the tenth floor like an elevator. They're likely to descend like an escalator, and a very shallow one at that. They may never reach the ground floor again.
© Getty Images A woman sitting in the driver's seat of a new car and talking to a salesman through the window.
Owning a vehicle is an expensive prospect. Between maintenance, loan payments, and car insurance, transportation expenses can easily become a budget-buster for consumers who aren't careful.
If you need a car, you may be thinking of purchasing a used one over a new one due to the initial savings involved. New car buyers paid an average of $48,043 in June, reports Kelley Blue Book. Meanwhile, the average cost of a used car was $28,012 in June.
All told, that's roughly $20,000 in savings, which certainly isn't a negligible amount. But while you might think you're getting a better deal by purchasing a used car, here's why you may want to go another route.
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1. You may get a limited warranty -- or no warranty at all
When you buy a new car, you'll commonly get a three-year, 36,000-mile warranty that protects you from bearing the cost of major repairs during that time. You'll also commonly get the option to extend that warranty a few more years for a modest fee.
When you buy a used car, it may come with a very limited warranty -- if it comes with one at all. That means that if a major component breaks shortly after you buy the vehicle, you could end up on the hook for the cost of repairing it.
2. You could lose out on fuel efficiency
Cars have been getting increasingly fuel efficient through the years. If you buy a used car, you might lose out in that regard. The result? Much higher gas costs.
Meanwhile, earlier this year, gas prices soared in the wake of the Ukraine conflict. And while they've dropped a bit over the summer, they're still expensive. Buying a used car could mean spending more money on fuel on an ongoing basis. And so what you save by purchasing a used car over a new one, you might spend on gas.
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3. You can't customize any features
It's important to not go overboard when buying a new car, because the more bells and whistles you treat yourself to, the more expensive that vehicle will be -- and the higher your auto loan payments might be. But when you buy a used car, you get no say in how it looks or functions. And if you're going to be doing a lot of driving, that's something you might find bothersome.
4. Your car may not last as long
Used cars, by nature, have more wear and tear than new ones. As such, if you buy a used vehicle, it may not last as long as a new one, which could leave you having to replace it sooner. And depending on how many years you get out of that car, you could end up losing out financially.
Think carefully before you buy a used car
There are certainly benefits to buying a used vehicle, and if you purchase a certified one from a reputable dealer, you may not have to worry about hidden issues lurking. But before you move forward with your decision, be sure to weigh the pros and cons carefully. You may decide that you're better off with a new vehicle after all.
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How to Buy a Used Car .
Our tips and expert picks will help you find a reliable pre-owned vehicle at a price you can affordBy Benjamin PrestonUsed-car prices have soared this year, and according to market analysts, they ’re likely to remain high for a while. The reasons are complicated. In short, a global microchip shortage has meant that automakers can’t build new cars fast enough to meet demand. Fewer new cars for sale has increased demand for used cars, pushing prices up more than 40 percent above normal levels this past summer.