Today, car buyers could be paying more for an older used vehicle with more mileage.
Toyota
Used car pricing is improving, but still astronomically higher than it was pre-pandemic.
About 60% of used cars were under $20,000 just 5 years ago. Today, that’s down to about 30%.
It means a car buyers’ $20,000 budget doesn’t go very far today.
If you’re in the market for a used vehicle with a budget of $20,000 or less, you’re likely to have a harder time finding one today than you might’ve five years ago.
Only 30.6% of used vehicles sold for under $20,000 in the first quarter of this year, according to analysis from car-buying resource Edmunds. In 2018, double that — 60.5% of used cars — would’ve cost under $20,000.
Looking at average used car prices doesn’t paint a better picture. The average used vehicle cost a whopping $28,381 last quarter.
That’s an improvement from the average $30,329 used price tag just one year ago — but it’s up substantially from a pre-pandemic average used transaction price of $19,657 in 2018, according to Edmunds.
The data is just the latest indicator of today’s car-buying market’s many challenges — and ultimately, shatters many car buyers’ hopes of finding an inexpensive “starter car.”
So why the high used car prices?
The pandemic’s supply crunch impacted both the new and used car markets. Both saw pricing go up with little inventory and options available. People who were able to buy either a new or used car likely paid a lot for something that might not have been exactly what they wanted.
Now, pricing might be dropping slowly, but the used market especially is still navigating plenty of dynamics.
People are generally holding onto their vehicles for longer, because of lingering high pricing, a lack of inventory, and even the ever-improving quality of cars.
Many drivers are also buying out their lease contracts instead of returning those cars, or simply not leasing as frequently. As a result, the lease-to-used-market volume has dropped significantly.
Plus, new car pricing being more expensive generally translates to the used market.
All three factors are limiting the types and availability of used vehicles. That feeds into persisting supply-and-demand constraints and keeps pricing up.
Edmunds found that a 2018 Toyota Camry, for example, with 60,565 miles on average, sold for $21,223 in the first quarter. Just three years ago, it would have had 26,288 miles and an average price of $19,656 — indicating that today, you could be paying more for an older vehicle with more mileage.
What can a buyer do?
Because there are fewer off-lease and low-mileage, young vehicles making their way to the used car market, buyers are likely to have to choose from older, higher-mileage used vehicles in general, if they want to stick to a sub-$20,000 budget.
Edmunds experts recommend customers know their trade-in value. Much like prices, values, too, have fallen, but certain used vehicles might still be in high demand. Shopping around for preapproved financing is another way to navigate the market. Lastly, flexibility is key — like during the pandemic, buyers might not be able to find exactly what they’re looking for at the price they’re targeting.
One thing to keep an eye on that might be surprising — new vehicle prices.
“If new car sales stall out, automakers and dealers could leverage heavier incentives to entice consumers into new purchases,” Ivan Drury, Edmunds’ director of insights, said in a release, “which would in turn place downward pressure on used car values.”