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    Why Are Used Cars Becoming More Expensive?

    Damien Frost
    Damien Frost - 2020-10-28T22:00:00.000Z
    Used Car

    Since the end of the Great Recession, the prices of new cars have steadily grown while the market value of used vehicles stayed comparatively low. Unfortunately, this trend has recently seen a sharp change and secondhand cars aren’t as affordable as they used to be. 

    What’s the reason behind this sudden increase in used car prices?

    As the COVID-19 pandemic spread, almost every business was impacted. For instance, the demand for vehicles increased since people wanted to avoid public transport and follow the recommended social distancing guidelines.

    As per Edmunds, the average listed price for all used vehicles climbed to $21,558 by the end of July, a $708 increase compared to June 2020. This is an unprecedented historical shift.

    Owing to a shortage of new car models, many auto manufacturers and dealerships have started offering certified pre-owned (CPO) programs and used car finance deals with extremely favorable interest rates.

    Due to this sudden demand, the average price for a 2017 model across all categories (SUV, compact, trucks, and other midsize vehicles) has increased substantially. 

    Although there are many deals in place, used auto customers will now face the dilemma of possibly negotiating with less-flexible dealers.

    The Pros And Cons Of Buying A Used Car

    Pros

    • Second-hand vehicles tend to be less costly due to the rapid depreciation
    • Due to the lower price, buyers can afford to pay in cash and avoid taking out a lending product
    • Buyers can give a sizeable down payment and avoid taking out a large loan amount
    • More chances of getting a higher-spec model within budget
    • Used auto loans can be paid off quickly
    • Lower insurance premiums
    • Some dealerships may offer extended warranties

    Cons

    • Pre-owned vehicles are less reliable
    • It may need frequent repairs; thus, increasing the overall cost
    • Most used car finance deals offer a limited warranty
    • Limits on models and years of manufacturing
    • Car dealership loans charge higher rates for used vehicles than new ones

    How Do I Get An Auto Loan If I’m Struggling With Low Finances Or Bad Credit?

    If you have low income or no savings, you may be looking for a  car dealership with no down payment. Fortunately, getting a used auto loan when you have bad credit or modest finances is easier compared to new auto loans. This is mainly because the price of pre-owned vehicles is on the lower end of the spectrum and many lenders, dealerships, and auto manufacturers offer amazing CPO deals. If you’re struggling with a bad credit rating, here are some options to get the required financing:

    Personal Loan

    Taking out a personal loan is probably the cheapest and easiest way to finance a pre-owned vehicle, especially if you’re trying to find a no credit no down payment car dealership. There are a lot of lenders offering personal loans, so make sure to do the research and choose one that offers low rates and flexible terms. 

    This type of financing can cover the entire cost or a major portion of the vehicle’s listed price. In addition, you’ll be able to choose how much time you need to repay the debt. Just remember to calculate if you’ll be able to afford the repayments comfortably.

    Dealership Loan

    These loans work a bit differently than other lending products. You go to a dealership, select the model, then apply for financing through the dealer. Usually, these car dealerships accept bad credit and repos. They’re also more likely to be connected with sub-prime lenders. Depending on your credit history and rating, they’ll connect you with interested lending companies and help you through the financing process. 

    However, the interest rates might be slightly higher than usual since the dealerships include a percentage on top of the lenders’ rates. Do the research, and don’t forget to negotiate with the salesmen for a better APR.

    Auto Loans

    The difference between bad credit auto loans and regular auto loans is that you’ll pay a higher APR on the former. Search for car dealerships with easy financing since the higher the interest rate, the more the vehicle’s overall cost. Auto lending products with high rates are more prone to going upside-down.

    With a used auto loan, the lender accepts your vehicle as collateral. You’ll get a moderate interest rate and fixed repayment term. Make sure to gather quotes from various subprime lenders before you choose the right deal.

    Bottom Line

    Auto experts predict that second-hand vehicle prices will fall slightly in 2021 when new models start showing up. As a result, the costs of 2020 and older models will be reduced. For now, it’s an excellent time for sellers who are trying to get rid of their cars. It’s also an optimal time for buyers who are willing to buy pre-owned vehicles with amazing CPO deals.