Lets summarize what Lucky has to say, as we’ve found his analysis to be spot on throughout the year of 2022. In addition, Lucky tends to provide industry insights, as he is involved in the car industry.
The used car market has seen significant changes in the past year, with prices dropping at auctions and a slowdown in demand at dealerships. In this article, we’ll delve into the factors behind these shifts and discuss what it means for those considering purchasing a used car.
First, let’s examine the drop in used car prices at auctions. In 2022, we’ve witnessed a 27% drop in vehicle values at auction, with a 12% loss in November alone and a projected 3.8% loss in December. While some may hope for a crash in the market, this is unlikely without a catalyst, such as government regulation on auto loans. Instead, we’re likely to see a restriction on buying and a slower market, with prices eventually returning to their original values.
So, what’s causing the drop in used car prices? One factor is the increasing supply of cars, including repossessed vehicles, as people struggle to keep up with their loan payments. In addition, the demand for used cars has decreased due to high interest rates for car loans. If you have good credit, you may be looking at a 6.25% interest rate on a car loan, and that rate is expected to increase in the coming months. For many people, this means that the same car they purchased in 2019 with a $300 monthly payment could now cost them $500 to $600 a month, almost double what they were paying before. It’s no surprise that people are reluctant to pay these higher prices and finance such exorbitant amounts of interest.
But it’s not just the high prices that are causing a slowdown in the market. If you visit a dealership, you may notice that they have more cars on their lot than usual, indicating a surplus of supply. Additionally, websites like CarGurus and Auto Trader show the length of time a car has been on the market, and we’re seeing an increase in the number of cars that have been for sale for months or even a year. This “days on market” metric is a key indicator of supply and demand, and the fact that it’s increasing suggests that there’s not only more supply but also less demand for used cars.
Lending institutions are also contributing to the slowdown in the used car market. Many banks and other lenders have tightened their standards for loans, and are no longer lending as much as they used to. This means that even if someone is willing to pay the high prices and interest rates for a used car, they may not be able to secure the necessary financing.
So, what does all of this mean for those considering purchasing a used car? It may be wise to wait before making a purchase, as prices are likely to stabilize in the future. If you do decide to buy a used car, it’s important to do your research and make sure you’re getting a good deal. Look for cars that have been on the market for a shorter amount of time, as they may be more in demand and therefore have a higher price. You should also be prepared to negotiate and shop around to find the best deal possible.
In conclusion, the used car market has undergone significant changes in the past year, with prices dropping at auctions and a slowdown in demand at dealerships. A combination of factors, including the increasing supply of cars, high interest rates for car loans, and tighter lending standards, are contributing to the market slowdown. If you’re considering purchasing a used car, it may be wise to wait until prices stabilize and do your research to get the best deal possible.