Buying a used car? Now could be your best chance

The Used Car Market: A Buyers’ Paradise

The used car market is currently experiencing a shift that’s making it more attractive than ever for consumers. With prices dropping and the availability of vehicles increasing, now could be an excellent time to consider purchasing a pre-owned vehicle. According to recent data from Edmunds.com, the average price paid for used vehicles in the second quarter of 2024 was nearly 7% lower compared to the same period last year. This downward trend is not just about lower prices—it's also about the speed at which cars are being sold.

Despite the drop in prices, the average time it takes to sell a used vehicle has remained relatively stable, at 35 days compared to 34 days a year earlier. This suggests that while dealers are still selling cars quickly, they’re doing so at lower prices. Ivan Drury, director of insights at Edmunds.com, explains this phenomenon as a classic example of supply and demand in action. “You’re seeing real life, true economics happening right before your eyes,” he said. “If you never understood that Econ 101 class, all you have to do is go buy a car.”

Supply Meets Demand

One of the main reasons for the decline in used car prices is the increase in supply. As inventory of new cars improves, more vehicles are being traded in, which adds to the used car market. This increased supply helps bring down prices, making it easier for consumers to find affordable options. Additionally, the improvement in new car inventory has led to lower prices on new vehicles as well. The average transaction price for a new car in the second quarter of 2024 was $47,424, compared to $47,866 in the same period a year ago. While the decline is smaller here, it's still significant.

Drury noted that the average discount for new vehicles has risen sharply, from $611 in the second quarter of 2023 to $1,687 in 2024. This increase in discounts is largely due to carmakers offering low finance deals or longer-term loans, which can make new cars more affordable. However, these incentives aren’t always reflected in the transaction price, which is why the decline in new car prices isn't as noticeable as it is in the used market.

Electric Vehicles: A Unique Case

One of the most notable trends in the used car market is the sharp decline in prices for electric vehicles (EVs). Drury pointed out that prices for used EVs have been falling for two consecutive years, which caught many by surprise. For instance, a 2021 Tesla Model Y, which originally sold for $69,570, was available for $31,064 in May 2024 with about 42,000 miles on it. Similarly, a 2021 Toyota RAV 4 Hybrid saw its price drop from $41,298 to $30,006 over the same period.

The average transaction price for used EVs fell by 20.8% in the second quarter of 2024, compared to the same period in 2023. This significant drop is due to several factors, including the slow adoption rate of EVs and the challenges associated with their resale value. Despite these issues, Drury believes that the deal offered by used EVs can be very attractive for consumers looking for affordable transportation.

Trade-In Age and Buying Behavior

Edmunds data also shows that the typical used car in the second quarter was 4.5 years old with 52,478 miles on it, while the average used EV was 2.7 years old with 29,430 miles. This means that buyers who are open to electric propulsion might find better deals in newer used EVs.

Drury explained that the age of a trade-in car often influences a buyer’s decision. Older trade-ins tend to lead to purchases of used cars, as owners may find it difficult to afford new vehicles. However, there are exceptions. For example, the Chevrolet Trax and Buick Envista were popular choices among buyers trading in older vehicles because of their low starting prices. These models helped boost General Motors' sales in the second quarter, showing how specific models can influence consumer behavior.

Challenges in the Used EV Market

Despite the benefits, the used EV market presents unique challenges. The volatility of EV prices makes it difficult for both sellers and buyers to predict accurate values. Factors such as range anxiety, the high cost of new EVs, and the lack of reliable public charging infrastructure continue to hinder widespread adoption. In response, automakers are offering incentives and lease deals to move new EV inventory, which further impacts the used market.

Drury noted that some dealers are reluctant to accept used Teslas due to their rapid depreciation. “The new car market is tramping down these prices,” he said. However, he also pointed out that most used EVs come with an eight-year powertrain warranty, which can help ease concerns for potential buyers.

For those hesitant to buy used cars, the idea of purchasing a used EV might seem daunting. But with the right deal, many consumers might find it hard to resist. As the market continues to evolve, the used car landscape offers more opportunities than ever for savvy shoppers.