Write About Everything

Our top picks

Top Picks

Guides & tips

Guides

Calculators

Tools

My NerdWallet

Used Car Prices are Dropping What Does This Mean for Car Buyers

Advertiser disclosure You’re our first priority. Everytime. We believe that every person should be able to make sound financial decisions without hesitation. Although our site does not include every company or financial product in the marketplace, we’re proud that the advice we provide and the information we offer and the tools we create are independent, objective, straightforward — and completely free. So how do we make money? Our partners pay us. This could influence the types of products we review and write about (and the way they appear on the site) However, it in no way affects our recommendations or advice that are based on many hours of research. Our partners cannot promise us favorable review of their services or products. .

Used Car Prices are Dropping What Does That Mean for Car Buyers

Used car prices saw a massive decline in December, but buying a car now can remain prohibitive for certain buyers.

by Whitney Vandiver Writer | Car ownership, maintenance of cars Whitney Vandiver writes for NerdWallet on ways that car owners can save money on ownership and maintenance. She was previously a writer in the petroleum and gas industries, where she was recognized in national newspapers and international magazines. Whitney became a writer out of love and finds stories that highlight or help people in the LGBTQ+ community the most rewarding to craft. When she’s not writing, she’s reading and walking with her Irish Wolfhound. She’s based in Houston.

Feb 1st Feb 2023

Edited by Julie Myhre-Nunes Assistant Assigning editor Auto loans, consumer credit Julie Myhre-Nunes works as an assistant assigning editor at NerdWallet. She has been working in the personal finance space for over 10 years. Prior to becoming a part of NerdWallet, Julie oversaw editorial teams at NextAdvisor, Red Ventures and Quote.com. Julie’s personal financial insights have been featured on Forbes, The Boston Globe and CNBC throughout the years. Julie’s articles have been published by USA Today, Business Insider and Wired Insights, among others. Email: .

A majority of the products featured here are from our partners, who pay us. This affects the products we write about and the location and manner in which the product appears on the page. However, this does not influence our opinions. Our opinions are entirely our own. Here is a list of and .

After more than a year of overheated prices the used car market was cooled by several degree in the month of December.

The new trend offers some relief for car buyers. However, inventories have not yet get to levels pre-pandemic and consumers still miss the purchasing power they had in 2019.

While experts say this year’s used-car market will improve Consumers must have realistic expectations of the way that car purchases will play like in 2023.

December saw a record-breaking drop in used-car prices

According to a report published in January 2023 from CoPilot an app that is personalized to help you buy a car, used-car prices fell during December, for the 6th straight month, dropping 8.8 percent from January 2022. To put it in perspective this was the largest annual drop the used car market has experienced since the last month during the Great Recession in June 2009.

However, they’ve left a long way to go before they’re in a familiar space — the median used-car price was 30.1% higher than a market-rate average.

The market is witnessing “more of a gradual returning to normal than one would normally consider a decline,” says Joseph Yoon the consumer insights analyst at Edmunds, an online guide to cars. “The prices are still very, very, very much higher.”

The current interest rates are a barrier to used car access to affordable financing

One factor that has influenced the prices of used cars is the Federal Reserve’s aggressive increase in interest rates due to rising inflation.

According to Edmunds, the average rate of interest for a used car loan was up from 8.76 percent in July, to 10.25 percent in December. As loan rates increase people who finance vehicle purchases will be paying more , despite the lower price of the sticker.

What this means for car buyers

Consumers planning to buy an used vehicle this year may be pleased to see lower costs for windshields but they’ll still have to navigate a distended car market. Buyers of used cars should be aware of several trends when shopping for a second-hand car this year.

Cheaper prices compared to 2022

As demand for used cars wanes, prices should be expected to continue to fall. Based on J.P. Morgan Research, the cost of used cars could fall as much as 10 percent to 20% by 2023. Should it is the case that the Fed continues to raise rates of interest, the cost of vehicles will likely keep their downward trend.

But not all car models will drop in price at the same rate. Smaller cars and pick-ups have had the smallest changes in prices since January 2022, as per Cox Automotive, an auto data firm — while high-end vehicles and SUVs have experienced the most drastic price reductions.

In the event of a continuation of an ownership cost higher than normal

As used-car prices drop and attract potential buyers, the increase in interest rates will mean that those who need to finance their purchases will continue to feel the strain of an overpriced market.

Car buyers who take advantage of falling prices and make finance purchases in the midst of higher interest rates might pay more for a car for the duration of the loan. In addition to a higher monthly payment, they could be faced with negative equity in the future and end up .

Values for trade-ins fluctuate

According to J.D. Power which is a firm that conducts research and data that tracked trade-ins in December, vehicles were able to receive an average value of just $786 in value when they were that were traded in June. Since dealerships are expected to earn less from used car sales, trade-in values will continue to decrease compared to the previous year.

People who plan to trade in their current vehicles should expect lower prices than those offered in the past year.

“It’s going to be a substantial drop of what you’re gonna get from the value of your trade-in the price if you were searching for a car at the end of September” says Terrance Gandy who is the sales manager for used cars in Route 44 Toyota in Raynham, Massachusetts.

Inventory levels have increased, but remain relatively low. levels

While automakers are working toward pre-pandemic production levels and used cars are getting more affordable, the consumer demand will continue to be strong following the shortage of vehicles in previous years, according to J.D. Power. This could reduce the available stock of used vehicles as more car buyers decide to buy cars after waiting for used car prices to drop which reached their highest in September.

“Even the prices do go lower,” says Yoon, “for the next few years we’ll still be a million of vehicles short on used car inventory.”

But that will help some consumers gain a leg up when bargaining trade-in offers.

“They have a much better likelihood of negotiating now because dealers have to take these cars off their lots,” says Gandy. “The ball is in your hands if are able to trade in your car because right now these dealers need your vehicle.”

About the writer: Whitney Vandiver is a writer at NerdWallet currently focusing on the maintenance of vehicles and car ownership. She’s written previously about payments for small businesses and payment.

On a similar note…

You can even go deeper into Auto Loans

Get more smart money moves right to your inbox

Sign up and we’ll send you Nerdy content on the money topics that are important to you and other ways to help you get more from your money.

Make all the right money moves

Banking Credit Cards Financial Planning Finance News Insurance Investing Loans Mortgages Travel for small businesses Taxes

about

Help

legal

Download the application

Disclaimer: NerdWallet strives to keep its information current and up-to-date. It is possible that the information presented may differ from what you will see when you visit a bank, service provider or the website of a specific product. All products and services offered by financial institutions, including shopping services and products are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers aren’t binding. If you find discrepancies with your credit score or information from your credit reports and/or credit score, you should contact TransUnion(r) immediately. NerdWallet Compare, Inc. NMLS ID# 1617539 California: California Finance Lender loans are arranged in accordance with Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812. Property and Casualty insurance services offered through NerdWallet Insurance Services, Inc. (CA resident license no. OK92033) NerdWallet(tm) | 55 Hawthorne St. – 11th Floor, San Francisco, CA 94105

NerdWallet USA

|

|

|

|

(c) 2023 NerdWallet, Inc. All Rights Reserved.

If you beloved this short article and you would like to receive more facts relating to $255 Payday Loans Online Same Day (https://loan-sld.site) kindly check out our web site.