Are used car prices going down?
If you’ve been watching the car market and keeping tabs on used car prices, chances are high that you’re smiling at this instant. This is because used car prices are dropping hard and fast. The drop in used car prices in 2022 is largely due to the prevailing economic situation in the country. As inflation bites deep, the demand for used cars has declined, causing more sellers to offer their vehicles for less to recoup some money for it.
As a used car owner, this is probably not the best time to sell your car. We discuss the best time to sell your car in this article you can find here.
Despite the drop in prices of used cars, the prices of newer models aren’t for the faint-hearted. This means you may need to add more money than earlier planned to purchase a newer car. But why are used car prices dropping in 2022?
Why are used car prices dropping?
Used car prices dropped by 4% in August 2022, according to Manheim Used Vehicle Value Index. Data available projects that used car prices may drop even further in the coming months. With used car prices being at the lowest point since September 2021, it is important to investigate the cause of the downturn.
Although used car prices vary based on the brand, model, and even the state where it is sold, there has been a general drop in prices across the board. For example, used Honda, Hyundai, and Toyota vehicles have also experienced a slight decline in their prices.
The dropping prices of used cars can be traced to a few factors, including;
Rise in the number of repossessions and auto loan defaults
More people are defaulting on their auto loans due to the rising inflation rates hitting America. Currently, more than 45% of American families are experiencing moderate to severe hardship due to inflationary effects. The rise in inflation rates has wiped up many people’s savings and has affected their purchasing power.
The economic hardship has led to a sporadic rise in auto loan defaulters. Creditors, in a bid to recoup their money, have also initiated a mass repossession strategy. Sadly, the car repossession rate, which was at its lowest in 2020, has since increased by at least 11% according to Jalopnik.
More cars losing value faster
Although the rising inflation can be blamed for the drop in used car prices, another factor that plays a role is the used car’s make and model. Some used cars are now losing value faster than before, whether due to consumer bias or a decline in demand for them.
According to a recent report, the used car prices of brands like Honda, Toyota, Hyundai, and Mazdas have remained on the high side despite little chips caused by the current economic tide. However, other vehicles like the Cadillac CT5-V and pre-owned sports utility vehicles are taking a beating in the market.
Why used cars lose value
Depreciation is the biggest enemy of your car’s value. About 20% to 30% depreciation kicks in as soon as you drive your car away from the dealership till the end of the first year of use. You lose another 18% to 25% of your car’s value annually between years two and six.
While depreciation is the biggest threat to your car’s resale value, other factors include;
Your car’s brand
Some vehicle brands, like Toyota, Honda, and Hyundai, have a better resale value compared to others. This means that you’re better off buying vehicles with better-used car values compared to those rarely in demand after they’ve been owned.
Performance parts and aftermarket accessories
Vehicles with readily available and affordable performance parts and aftermarket accessories are more likely to sell faster and for better prices in the used car market. This is because buyers are confident in the availability of tune-up, repairs, and servicing parts. However, vehicles with scarce accessories and performance parts are likely to be a hassle for owners when they break down.
A vehicle’s mileage tells an important story about its life and life expectancy. Vehicles with higher mileage on them are closer to the junkyard than those in newer condition. The higher the mileage, the lower the used car price or demand for it.
Used cars sell faster when in great mechanical condition. Fully functional used cars command more money from private buyers who may bid to get them. The same cannot be said for junk cars that have lost their mechanical power and edge.
Drivetrains and seasonal demand
Some vehicles are better suited for specific seasons. A typical automatic transmission vehicle will sell faster than a manual transmission car. On the other hand, specific seasons may also favor a salon car over an SUV and vice versa. You may need to research the best times your vehicle type is in demand and wait to sell it then.
Interior and exterior condition
Used car buyers are interested in the vehicle’s mechanical and electrical parts just as much as they fancy its appearance and appeal. You’ll command better prices for your used car when you keep its interior and exterior parts in pristine condition.
How to protect your car’s value
The current drop in prices of used cars has caused an increase in demand for information on how to protect your car’s value. Here are ways to protect your car’s resale value.
Regular maintenance is one of the biggest ways to keep your used car in top performance and safety conditions. Your maintenance and servicing records should also be kept up to date with information about oil changes, transmission fluid replacements, brake work, tire rotations, and others.
Keeping an up-to-date maintenance record tells the eventual buyer that you’ve paid the highest level of attention to the car. It also boosts the buyer’s confidence in the expected performance and lifespan of the vehicle.
Driving your car less may sound counterproductive, but it sure works. Used car buyers are interested in your car’s mileage. The mileage tells them how close your vehicle is to the junkyard or its end of useful life. By driving less, you keep the mileage low and keep the car’s value high.
Maintain the interior and exterior
Pre-owned car buyers are not only interested in a car that runs. They want a car that’s visually appealing and aesthetically okay. You’ll sell your car for a better price if you’ve kept the interior and exterior parts in good shape.
To keep your car in good interior and exterior shape;
- Avoid smoking in it
- Drive safely to avoid accidents
- Don’t treat your car like a restaurant
- Wash and clean the car’s interior and exterior regularly.
Despite the falling prices of used cars, you can trust Cashforcars.io to offer you fair prices for your used or junk car. We buy used cars in any condition, whether it is totaled, damaged, or past their useful life. Our used and junk car buying process is fast and easy, allowing you to request a quote, schedule a pickup, and get paid in 24 hours or less.