There’s really good news for the cheapskates and frugalistas out there; media reports indicate that used car prices are falling.
The sales price of the average used car in the United States was slightly over $11,000 in June 2014; by September it had fallen to $10,963, Truecar reported. The CarGurus reported that used car prices have dropped by 5.4% since May 2014.
The reason for the decline is that there are more used cars on the lots. There were around 9.26 million used cars for sale in June and around 9.77 million used vehicles for sale in November. Increasing supply, as those who understand economics know, drives down prices.
The supply of used cars is increasing because of an increased number of new cars pushed by the economic recovery and the huge number of leased cars. When leases end, the vehicles are sent back to the lots to sell off. Many of the new car sales involve a trade in, which also sends a car to the lots.
Lower gasoline prices are also driving sales as people drop economy cars and hatchbacks for larger rides. Green car sales are also falling as people worry less about fuel prices.
Another trend that might be affecting car demand is the falling rate of car ownership in the U.S. Fewer people are driving and buying cars, which will have some effect on demand. It must also be pointed out there that the economic recovery has not spread to the lower income brackets yet. Some economists note that the incomes of the working class and poor—the main market for used cars—are shrinking.
Another piece of good news is that there are more certified and inspected preowned cars on the lots. Growing new car sales means less for used cars, which lowers prices at a time when supply is increasing.
What’s interesting, though, is that the sales of used cars are up, probably because of lower prices, but only slightly—by around three percent in September, according to The Detroit News. Interestingly, new car sales increased by around 9.4% during the same period.
The Season to Buy a Used Car
So it looks like it is a very good time to go used car shopping. What’s even more interesting is that prices will fall even more over the holiday season, according to CarGurus. CarGurus Director of Data Analysis Dave Galvin noted that dealers will actually lower prices in December because they do less business in that month.
CarGuys analysts expect that prices will stay low in January and start rising again in February. Spring and summer are traditionally the major car buying seasons in the United States. CarGuys also predicted that used car prices could fall another 2% in January.
It should be noted here that these predictions cover the entire market. As always, there will be specific models or kinds of cars that will keep going up in price because of demand. An example of this is late model work vans with low mileage for which there is always a strong demand.
If you’re looking for a used car, it might be a good time to head to the dealerships. The supplies are up and the prices are down, and the situation is liable to get much better soon.