Have you wanted to get your hands on a new car for a while? Perhaps instead of a shiny and sparkly new car, you prefer one that is road tested or termed “used”. The question is, is buying used a good option based on the market values of the cars? Is it the right time to buy a used car or should you wait it out until prices drop? Are used car prices dropping? Should you sell your old or used car now or wait until the value is improved? All these questions will be answered and reviewed in this article.
To begin, let us examine what Lucia Mutikani has stated in her report. According to Lucia, in the United States, used cars dropped 1.6% in value this year, the most significant drop in car values since 2009. Looking from an economic perspective, this is the result of an increase in the costs of daily necessities. Such as food, energy, and gas. This impacts the values of the car markets heavily affecting both new and used cars. On top of that, the costs of other amenities like housing, recreation, and luxuries have risen. Which has led to a steady drop in car values this year.
However, according to British Car Auctions (BCA), the average value of cars fell during July 2018, month-on-month by 1.8%. They state that on a yearly basis, values have risen by 5.5%. Even so, the average value of fleet and lease cars fell month-on-month by 0.8%, corresponding to a year-on-year increase of 5.8%. Average dealer, part exchange values, rose month-on-month by 0.5%, a record value for the sixth month on a row. Mileage and age of vehicles sold have been decreasing, with an 8.7% yearly rise in value. Nearly-new cars rose month-on-month 8.7% and year-on-year by 29.9%. These values, according to BCA COO for the UK remarketing Stuart Pearson, show “the strength in depth across the used car market.”
Though values seem to be rising in the UK, on American soil, the story seems to be different. According to Business Wire, falling car values are due to a rising trend of consumers favoring used cars over new ones causing the value of a vehicle to drop as more and more demand has been placed on the used car supply on the market. However, the drop in car values does not appear to have a long lifetime.
Also according to Business Wire, the drop in car values in 2017 was 3.63%, but economists forecast that the percentage of price drops will slow to 1.07% in 2019 and ultimately hit a minimum in 2020. It means that, in all likelihood, in the years after 2020, car values will either stagnate and residual values will stagger around from 2020, or the cost for used cars will begin to rise again as the trend changes.
Business Wire also cited Moody’s Analytics Autocycle in stating that the general residual values of a 3-year-old truck are predicted to drop from 56% to 50% while a car of the same age will rise in residual value from 47% to 49%, even out the residual values of vehicles in general to about equal levels.
On the other hand, values for pickup trucks and minivans are rising in some local regions. This rise, according to Auto Trader, is a direct result of the growing housing and construction movement in specific areas in the United States. It means that the need for vehicles specialized in moving, cleaning, and construction work has led to their increase in value. However, like all small trends, these values can change overnight. And even trucks and minivans may follow other vehicles in the downward trend in used vehicle values.
Auto Trader makes a stark analysis of the scenario by pointing out the declining values at dealer auctions across America. They agree with Business Insider’s assessment that car prices are falling due to economic shifts in essential price values. Like housing prices, living costs, and gas prices. According to Auto Trader car buyers have a perfect opportunity to get a great deal on a car of their choice.
Also, as Business Wire forecasts that values are to drop even further up until 2020. There is no rush to buy a used car just yet. On the other hand, this means that car sellers will suffer a decrease in profit margins.
If you are in the US and looking for a used car now is an excellent opportunity to buy one. In the UK, for instance, the story is not the same. There is a trend for a car value decrease, but predictions show that things will balance out in 2020. So you should not worry too much that your car’s value will plummet.