I know you’ve gotten sticker shock if you’ve been shopping for an used vehicle lately. Used vehicle prices have skyrocketed, and at some point you’ve probably wondered, “Would I be better off just buying new?” Well my friend, now might be the time to answer YES!
Let’s talk about what might persuade you to make that new purchase over an used vehicle purchase:
You hear about housing prices, and wonder when or if the housing market will ever correct. What you don’t hear is this — no one is talking about an eventual used car market correction, and yet we continue to see used vehicle prices skyrocket. While I don’t see the housing market correcting anytime soon, I absolutely see the used vehicle market correcting quickly once the chip shortage comes to an end. I mean, if you don’t know it there are literally thousands of new vehicles parked in storage lots all over the country, waiting to be chipped and sold, and as I talked about in my previous post [click HERE to catch up], supply and availability will always affect used car market values.
With today’s vehicle shortage, most people are paying 25 – 30% more than usual for an used vehicle — and that has become the new normal. However, when the market eventually corrects itself — and it will! — you just might find yourself upside down financially with your car, truck, or van. Not to discourage you, but this means your used vehicle could end up being worth far less than what you bought it for, and worth much less than what you still owe.
Make no mistake — auto manufacturers are in it to win it, and so at some point manufacturers who have an overabundance of vehicles to get rid of will do just that — they’ll focus 100% of their energy on selling new vehicles. Having the money to put behind getting themselves out of their large surplus of new vehicle inventory will become their number one priority — this means they won’t be focused on selling used cars at all. While this means you might be able to snag a phenomenal deal on a new car, the decreased amount of money they’ll be willing to give you for your used car — the one that you bought at a premium in 2020 or 2021 — could end up keeping you from taking full advantage of any new vehicle purchase incentives they offer.
As strange as it might sound, one of the safest places to be when it comes to protecting yourself in today’s market is leasing a new vehicle. It gives you short-term flexibility, regardless of what the used car market does. And it controls your budget, too, because everything is new and covered under warranty for the duration of the lease.
Be a wise shopper! In the fall of last year, my wife and I looked for an used vehicle and found dealerships asking nearly the same price for a three-year-old used vehicle with three years’ worth of mileage as they were asking for a brand new vehicle with no miles. So guess what we did? We both purchased new over used.
Watch for our next post when I discuss negotiating your best deal on a new vehicle.