Market Trends Favor Used Cars
 Making the Smart Financial Decision When Investing in a Vehicle.
May 18, 2024
After sitting on the sidelines for the past few years, auto shoppers are back in the market and ready to purchase a new or used vehicle. A new report from Edmunds says the used-car market is thriving with vehicles "flying off dealer lots at record rates". It is no wonder many customers are looking at used when so far in 2024, the average selling price of a new vehicle is approximately $48,000, while the average selling price of a used vehicle is around $27,000 when we researched Kelly Blue Book and Car Edge for pricing information.
At our dealership we have seen some pretty significant depreciation costs that new car buyers have suffered. With the price of new cars soaring over the past 3 or 4 years, the amount of depreciation can be staggering over the first two years of ownership. As we compile this post, we looked at the 2-year-old, 2022 used cars and used trucks we have in inventory and compared the sale price used versus the original manufacturer's suggested retail price. After figuring out how much each car had depreciated based on our sale price for these used cars and coming up with an average depreciation rate even, we were astonished to see a substantial 47% loss in value, with individual cars in our inventory approaching a 60% reduction in value over just two years.
Purchasing a used car is an increasingly smart financial decision, particularly in the current market. Recent data from Edmunds shows that used car sales are hitting record rates, driven by a combination of increased supply and cooling prices, which are attracting buyers back to dealerships. Here's why buying a used car can be a financially savvy move:
Lower Upfront Costs
One of the most significant advantages of buying a used car is the lower initial purchase price compared to new vehicles. The initial depreciation loss has already been absorbed by the original owner, allowing you to purchase the vehicle at a much more affordable price.
Reduced Loan Amounts
Because used cars are less expensive, the amount you need to finance through an auto loan is also lower. This results in smaller monthly payments and potentially a shorter loan term, saving you money on interest over the life of the loan. Even though interest rates for used car loans can sometimes be slightly higher, the overall lower amount of the car loan often means you'll still pay less in total interest compared to a loan for a new vehicle. In many cases, the used car loan will still result in less interest over the life of the car loan than a subsidized new car loan with a 1.9% or similar subvented finance rate from the vehicle manufacturer.
Slower Depreciation
Used cars depreciate at a slower rate compared to new cars. Once a car is a few years old, its depreciation curve flattens out, meaning it retains its value better over time. This slower depreciation can also make used cars a better investment if you plan to sell the car in a few years.
Lower Insurance Costs
Insurance premiums are generally lower for used cars. Since the value of the car is less than a new one, it costs less to insure. This can help reduce your overall monthly automotive costs.
Market Trends Favor Used Cars
Current market conditions make used cars particularly appealing. The high interest rates and elevated prices of new vehicles are driving many consumers to the used car market. Due to these market trends used car dealers, including our inventory here at Upper Valley Auto Mart in White River Junction, Vermont has been increased. Increasing inventory levels can help keep prices much more competitive. As the gap between new and used car prices continues to widen, a used car becomes a more attractive choice for many budget conscious shoppers.
Practicality and Selection
The quality and longevity of modern cars mean that buying used doesn't mean compromising on reliability. With the wide range of models and features available in the used car market, you can often find a car that meets your needs and preferences without breaking the bank.
In conclusion, buying a used car is not just a smart financial decision due to the lower upfront and overall costs, but it's also a practical choice given the current economic environment. With a vast selection, slower depreciation, and lower insurance costs, used cars offer tremendous value for money, making them an excellent choice for savvy consumers.
Let our team at Upper Valley Auto Mart help you find a great used car or used truck that will meet your wants and needs. With a great selection of used vehicles in stock, financing options with fifteen plus lenders, including lenders that are willing to help those who have some past credit blemishes and having been a top choice by readers of the Valley News for a dealership to purchase a used car, stop by and let us help you make the savvy choice in your next vehicle.
