Rising Used Car Prices: Why You Should Sell Now Before Prices Drop
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You have seen the commercials. “We have all used car models. Fords, Hondas, Chevys, Toyotas. You can’t beat the deals that we have at Mid-City Auto Sales. Time is running out, folks. You won’t see low prices like this for used car models ever again.”
Commercials like this example have been glaringly absent for the past year or so. Not only are used car prices not low, but they have also reached peaks that we have not seen in years. If you thought you were going to get a sweet deal on a used car model in 2021 at Mid-City Auto Sales, think again. According to research compiled by JPMorgan, used motor vehicles sold for 40 percent more in June of 2021 than the same models sold before COVID-19 hit back in February 2020.1
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The question for used car owners now is: should you sell while the market is hot or has the time passed for you to make a nice profit on your used car model?
Why Are Used Cars So Expensive Now?
According to Edmunds, the average price for a three-year-old used vehicle sold for $19,331 in June of 2021. That is 30 percent higher than it did at the same time in 2020. Moreover, a five-year-old motor vehicle sold for an average of $24,000. This is nearly $6,000 more than what the same make and model car sold for from one year ago.2
What is causing the absurd increase in used car prices? The simple answer is supply and demand. However, it’s not the cars that are low supply. The lack of supply of new vehicles has acted as a magnet for consumers, as they have moved into a used car market where supply has also been lower than normal.
What has caused the diminished supply of new cars? A record-low supply of microchips.
Smart cars are not so smart when they are not powered by technology. The low supply of microchips has created bottlenecks at auto assembly plants around the world. With the low supply of new cars comes an increase in prices because of the timeless law of supply and demand. Even with the pandemic choking demand, the dramatic decrease in the number of new vehicles available in the open market has sent new car prices soaring.
With new car prices making it unaffordable for many consumers to dabble in the market, consumers have instead flocked to the used car market. Once again, supply and demand comes into play. Except this time, it is a high demand that has driven the increase in the prices of pre-owned motor vehicles.3
When Should It End?
You do not need a crystal ball to see into the future for the prices of used cars. By many accounts, the average price for a used vehicle hit a high in May 2020. As we kiss summer goodbye, used car prices appear to be coming back down to Earth.
For the first time since early winter 2020, used car prices declined between May and June 2021. The reason for the decrease is our old friend supply and demand.4
Even when the supply of new cars returns to historic norms, it might not be for another six months when the imbalance between supply and demand disappears from the new car market. As a result, you probably have until early 2022 to sell your used car and reap the financial award of an out-of-whack supply and demand model.
What Are the Best Sites to Sell Your Car?
With six months at best to generate a healthy profit on the sale of your used car, which online sites offer you the most effective platform to sell your pre-owned motor vehicle? To help, here are three sites to get you started.
If you need a little advice on how to sell your used car, Autotrader is the best place to list it.
The site offers helpful buying and selling tips, as well as a feature that gets your used car listed on the website run by Kelley Blue Book. All you have to do is submit basic information and wait for the offers to come in for your review.
Autotrader makes it free to sell your used car to a dealership. However, you need to pay extra to sell it to a private party.
Thanks to incredibly power data analytics, CarGurus has earned the reputation for helping sellers set the right price for the sale of their used car. Thanks to the site’s helpful features, sellers can easily complete a transaction in just about one hour.
Better yet, payments process on CarGurus offers fraud protection on all payments up to $75,000. This ample amount of security gives consumers the peace of mind they need to conduct business online. 5
As a subsidiary of eBay, eBay Motors allows you to sell your used car through an auction or by listing it at a fixed price. Having an auction feature gives used car sellers the opportunity to sell at a higher price than they would get by listing on other sites.
Moreover, eBay claims that a survey of car buyers found that shoppers on eBay Motors have a higher intent to purchase percentage than any other online used car site.6