WEST PALM BEACH, FL – After months of skyrocketing used car prices spurred on by a shortage of new vehicles on the market due to COVID-19-related supply chain issues, prices are finally starting to show signs of falling in news that will be a relief to many prospective buyers; however, those lowering prices are unfortunately being offset by rising loan interest rates, effectively near canceling them out when it comes to the bottom line.
Prices for used cars reached their zenith in the spring, and have since dropped from that high by approximately 10 percent since that time; while a significant drop, used car prices nonetheless remain about 55 percent higher than they were prior to the pandemic.
However, prices of vehicles typically decrease in the final months of any given year to reflect annual depreciation, which should contribute to continued cost reduction, and experts are anticipating an additional 10 percent drop in 2023 due to the country’s current slow economy.
While this is good news for buyers who are paying cash upfront for their used cars, those who intend to finance their purchase will still be facing an uphill battle. Vehicle loan interest rates are continuing to climb as the Federal Reserve keeps rising interest rate in an effort to stimulate the economy and avoid a full-on national recession.
Currently, used automobile loans have a whopping interest rate of 9.2 percent, with an average term of 70 months, whereas new vehicle loan rates are at 5.9 percent for the same duration. Some lenders are offering zero-interest incentives for limited periods of time, but for no longer than 36 to 48 months.
Experts believe that the used car market will continue to experience affordability issues for some time to come due to an overall lack of inventory, driven by both demand and owners holding onto their own vehicles longer than they used to due to financial issues caused by inflation. Likewise, rental companies are also holding onto their fleets longer than before as well, contributing to shortages of used cars in the marketplace.
However, domestic car production is nearly back to the level it was prior to the pandemic, so eventually experts are anticipating the market to return to stability and affordability at some point in the future. But for now, it may be worth putting a few extra dollars into maintaining your current ride.
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.