Used Cars: Prices Rising But Will They Fall?

The prices of used cars are still rising, USA Today reported this past week. As new cars are rising in price, more buyers are turning to the purchase of used cars as the choice. In many ways it makes sense, when used cars, three or four years old, that are higher end cars with more options and feature can be purchased for much less than new cars with much less to offer. Increased demand for used cars, as a result, drives up their prices.

“The average new car went for $31,831 last year, compared with the previous year, up 1.9%, automotive data site TrueCar reports, while the average used car sold for about half that, $16,335. But that was a 5.1% jump from 2013, says TrueCar, with overall used-car sales up 3.3%. [sic]”

As the sales of new cars slowed, with fewer buyers trading in their used cars to new ones, it impacted the market for used cars by keeping the supply of used cars from growing. As more buyers trade in their used cars to purchase new ones, it increases the supply of used cars and puts pressure on those selling used cars to lower the prices.

But the future in used cars might lead to lower prices due to a coming glut in used cars, according to a recent report by Kelley Blue Book. The recent sales in new cars, which gave customers a chance to trade in their used cars, driven by incentives and offers from dealers and manufacturers, has increased the inventory of used cars.

“One of the factors that ignited the current sales boom was the meltdown in car sales that began in 2009. With sales off by more than a third, fewer used cars made their way into the market and as a result, prices were generally higher on (used cars), making the walk-up in price to a new car not that far. But now, after three years of recovery in the new car market, used inventory from both retail and fleet sales is beginning to grow. That supply will result in downward pressure on prices and perversely affect the new car market in two ways, by siphoning off some new car buyers and lowering residual rates making leasing more expensive.”

The TrueCar service, cited above, has been a factor in the sales of used cars, the Inquisitr reported. TrueCar is a web-based service that allows customers to access information on the sales of used cars so they are more prepared to negotiate the price on used cars with dealers. As a result, the data collected by TrueCar is quite valuable in making assessments about the market for used cars. Those who sell used cars will find it more challenging when buyers of used cars can tell them the market price for used cars, and this knowledge makes it tougher to charge consumers higher prices on used cars.

[Image of used cars from www.teensguidetomoney.com]