Why Are Used Cars So Expensive? How to Find Affordable Options

If you have been looking to buy a used vehicle you may have noticed that car prices have skyrocketed. It’s not your imagination. The prices of used cars have gone up 39.8% since pre-pandemic levels. It’s not a good time to buy a car if you’re working with a modest budget.

Holding off on that vehicle purchase may be the best course of action but sometimes that’s not an option. Used car financing can help and it’s smart to find out how much you can borrow before you start shopping. Once you know how much you can spend you can begin searching for affordable options.

Why Have Car Prices Been Surging?

Market prices are mainly affected by supply and demand. The automotive sector is no exception. The Covid-19 pandemic has caused some instability and challenges for auto manufacturers while simultaneously affecting customer demand.

The pandemic has disrupted supply chains around the world causing shortages in critical auto components such as microchips and semiconductors. This has caused production to slow down if not stop altogether. In 2020 alone the U.S. production of vehicles fell by 23%. Fewer new vehicles entering the market has limited affordable options and pushed more people towards used cars.

Labor shortages have hit many sectors pretty hard. The need for quarantine, people getting sick, and fears of covid-19 have negatively affected the workforce. A shortage of employees has also further slowed down the production of new vehicles.

Shrinking supply isn’t the only factor causing prices to skyrocket. Changing consumer behaviors, attitudes, and lifestyles have driven up demand as well. Fear of getting sick and telecommuting has driven more people out of city centers and away from public transit. This has made it necessary for people who were relying on other forms of transportation to purchase vehicles.

Diminishing supply and growing demand has created a perfect storm for the used car market. More consumers and a dwindling supply is pushing prices of used vehicles to unprecedented levels. When can we expect a market correction?

When Will Prices Stabilize In The Used Car Market?

Most experts are fairly certain that prices will remain high for at least another year or two. This is largely due to the shortage of microchips which is expected to continue for a couple more years. Even if demand goes back to pre-pandemic levels and auto manufacturers are able to keep their facilities fully staffed, production will not be able to return to full capacity without the materials required to build vehicles.

Additionally the economy is in a precarious position. Inflation has been high and if it continues even a price correction won’t bring car prices back to what they were. It is likely that vehicle prices will stabilize over the next few years but they will do so according to the economic conditions at that time. Pre-pandemic prices are probably not going to happen any time soon, if ever.

The volatility in the market means this is probably not the best time to buy a car. It’s a good idea to take care of the vehicle you have and to keep it on the road as long as possible. But what if you need a new set of wheels now? Is there a way to find some more affordable options?

How To Find Affordable Vehicles Right Now

The good news is that interest rates are very low right now. If you’re looking for an affordable vehicle buy used and take advantage of low rates with a good deal on used car financing. You can save hundreds if not thousands when interest rates are low.

This is not the time to get hung up on trivial details. Consider what you really need in a vehicle, and decide what you can do without. In a market like this it is unwise to let aesthetics like paint color or upholstery sway your judgment. Stick to what really matters and avoid paying inflated prices for frills.

Don’t be afraid to do a bit of travelling for a good deal and do some searching beyond your hometown. Expanding your search parameters to encompass a larger area will get you more hits and allow you to find deals that may have been overlooked because they’re outside of metropolitan areas. It’s not a good idea to buy a used car without seeing it in person and taking it for a test drive, so don’t be tempted to make that mistake.

Have more leniency on mileage when it’s the right car. While mileage is important and does give you some indication of how much life you can expect to get out of a used car, highway miles are not the same as city miles. Additionally, how a car was maintained is just as much of a factor. In many cases you’re better off with a well maintained car that has a lot of highway miles on it over a low-mile city driven vehicle that never had an oil change performed on time.

For lean budgets private sale vehicles may be the best option. Many people shy away from private sales because they come with no warranty and you have only the seller’s word as to the history and condition of the vehicle. But private sale vehicles are significantly cheaper and can be a real bargain. If you don't have much vehicle knowledge and you’re worried about buying a lemon you can always request that you have a mechanic go over the vehicle prior to the completion of the sale.

It may not be the best time to buy a vehicle but that doesn’t mean there are no good deals out there. If you look for a good deal on used car financing, expand your search parameters, keep an open mind, and look thoroughly you can buy a car which meets your needs while staying on budget. The right car is out there.