Prices for used cars reached an all-time high between late 2021 and early 2022. In November 2021, the average price for a used car was 41% more than prices before 2020. However, based on industry data, the prices for used cars began to drop in April of 2022. It’s possible that prices could return to normal or near normal by the end of this year and into 2023.
All-Time High Prices To Start 2022
At the beginning of 2022, prices for used cars were at all-time highs. Several factors contributed to the soaring prices. One reason was factory closures in 2020 due to the pandemic. This was mainly done to avoid worker exposure, but it greatly slowed assembly lines.
Another reason is the ongoing shortage of computer chips. This is probably the greatest factor in keeping prices high for new and used cars. Industry experts say that this is the worst time to buy cars since 1946. But the good news is that prices are finally starting to stabilize. It’s not a straight-line price drop but more of a gradual decline that should become apparent toward the end of the year and even more so into 2023.
When Will Used Car Prices Drop?
Generally speaking, buying used cars is a great way to save money versus buying a new car. However, it has been a lot more difficult in recent months to find good deals on used cars. Some industry experts are concerned that buyers are taking out long-term loans with high payments to get into new or used cars and that they may end up upside-down in them when this is all over.
So when can you expect used car prices to really drop? Prices have actually been dropping slowly since January of this year. Between April and May, used car prices dropped about 24% from previous levels. According to expert analysis of the situation, used car prices should see the biggest drop by October of this year. The drop should continue into 2023. If you have a used car to sell, then it might be a good idea to do that as soon as possible before the prices really decline.
What About New Cars?
New car prices have also soared along with used cars. The chip shortage is the biggest reason behind the increase in prices for new cars. The shortage of new cars has led to a run on used cars, which has increased prices. Many dealerships are short of new inventory as they have been allowing customers to pre-order or reserve cars before they come in. However, computer chip production is also beginning to normalize, so new car inventories should start stabilizing again by early 2023.
When it comes to buying used cars in this difficult market, it’s important to comparison shop and search in a broader radius than you normally would. It might be tempting, but you really shouldn’t pay more for a used car than you would a new one.
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