Despite the recent trend of falling used car prices at the wholesale level, it’s still not an ideal time to buy a used vehicle.
Actual Sales Prices Still Haven’t Gone Down
As mentioned before, falling wholesale prices of used cars hasn’t yet translated into lower sticker prices at dealerships. While wholesale prices started to come down towards the end of July and beginning of August, the average used car transaction price remained at an all-time high as of September, according to data from NADA.
Experts like Mark Schirmer, director of public relations with Cox Automotive, predict that prices will remain relatively steady in the near future. “We still think that with new vehicle inventory still low, we’re not expecting retail prices or wholesale prices to crash, but we certainly expect for them to come down some,” he said in an interview with The Hill. “We’re not expecting a huge correction. They’re going to stay historically elevated for a while.” For reference, Cox Automotive is the company that publishes the Manheim Used Vehicle Index.
Based on what Schirmer is saying, the price of used cars is likely to remain high for the near future. While that means people buying now will pay more than they would have even a year ago, it also means that those looking to hold out for substantial retail price drops may be waiting for a long time.
Interest Rates Are Still High
For those who need to borrow money to purchase a used vehicle, higher interest rates mean paying more for a loan overall. This means paying more in interest on top of paying an inflated price for a used car.
However, auto loan rates for new and used vehicles are likely to continue to climb through 2023. In September, San Francisco Federal Reserve Bank President Mary Daly told reporters that she believes the Federal Reserve will raise the federal funds rate again – up to around 4.5% this year, and next year up to around 5%. She suggested that the goal is to then keep the funds rate around 5% throughout the year before potentially bringing it back down starting in 2024.
So while auto loan rates for used cars are indeed much higher now than they have been in the recent past, they are also not likely to drop any time soon. That means that people who need a loan to buy a used car may have access to the best rates now than they will for a while.
Do Falling Used Car Prices Mean You Should Buy Now?
The short answer to whether or not it’s a good time to buy a used car is no, not unless you have to. A highly competitive market, record average prices, and high interest rates mean that now is one of the most expensive times to buy a used car in recent history. In short, falling used car prices at the wholesale level have yet to translate to good deals at the used car lot.
Despite the current unsuitable conditions, there are some reasons why people in need of a vehicle might want to purchase a used car at this time, rather than wait. Even higher interest rates are on the horizon, and there are no clear signs of sticker prices dropping anytime soon. So, now may be as good of an opportunity to buy a used car as one may have for some time to come.