Used Car Sales Soaring as Americans Seek Affordable Options
Amidst the pandemic, consumers splurged on high-end new cars; however, with the current high car costs and interest rates, drivers are redirecting their attention towards more affordable models. Nevertheless, finding these vehicles may present a challenge.
According to Joseph Yoon, an analyst at Edmunds, more shoppers are now opting for vehicles in the $45,000-$50,000 range, which includes mid-to-high-trim three-row SUVs. This shift is evident in the “days to turn” numbers, which measure how long cars stay in dealer inventory before being sold. Currently, vehicles priced under $50,000 only spend an average of 26 days on the lot, compared to 40 days for higher-priced vehicles.
Increased Demand, Limited Options
Despite the surge in demand for affordable options, consumers may find it difficult to come across cheap new cars. According to Brian Moody, the executive editor for Kelley Blue Book, there are not as many inexpensive new cars available as there used to be. In fact, in July, only one car model had an average new-vehicle transaction price below $20,000, and that was the Mitsubishi Mirage.
In the $20,000-$50,000 price range, consumers can find more options, with 14 out of 35 makes offering average transaction prices below $50,000. However, experts emphasize that transaction price alone does not provide the complete picture. The final price paid depends on factors such as markups, promotions by dealers, and add-ons selected by the buyers.
Factors Driving Limited Availability
The scarcity of cheaper options is a result of various factors. Consumer preferences play a significant role, as Americans tend to desire cars with more features. Automakers understand this and leverage it in their marketing strategies. As a result, they focus on producing higher-end models with the features consumers want. This has led to an increase in luxury car sales, which now account for about 20% of total new car sales.
In addition to consumer preferences, inflation during the pandemic era has contributed to higher vehicle prices. Rising production costs, driven by increased expenses for materials and supplies, are reflected in the prices passed on to buyers. Higher interest rates are also deterring potential buyers, especially those on a budget, further impacting average purchase prices.
Tips for Finding Affordable Cars
Here are some tips to help consumers find reasonably priced cars:
- Know your budget: Use an online auto loan calculator to determine the overall budget and potential monthly payments.
- Expand the search: Look beyond the local market to find more inventory and increase leverage against dealerships.
- Get prices in writing: Confirm car prices in writing before visiting the dealership. This ensures transparency and prevents potential rip-offs.
- Shop around for financing: Don’t rely solely on a dealer’s financing offer. Getting pre-approval for an auto loan from a local bank, credit union, or online lender can provide leverage for better rates.
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