With rising interest rates and the shadow of tariffs across their wallets, more Americans are opting for used vehicles. This, in turn, is driving up the prices of used cars. According to vehicle-buying site Edmunds, the average price of a used vehicle hit an all-time high in the third quarter of 2018, reaching $20,084. This figure is 3.5 percent higher than the same period last year, and up nearly 19 percent from five years ago. Compare this to the fact that Americans are paying an average of $37,007 for a new vehicle right now, according to Cox Automotive. More Americans are choosing their budgets rather than their desire for the newest features.
“We’re still seeing prices ratchet up,” Ivan Drury, Edmunds’ senior manager of industry analysis, told USA Today. “It’s definitely changing the landscape of the used-vehicle market.”
Edmunds has noted that five years ago, approximately one in four used vehicles were sold for less than $10,000. Today, that figure is only about one in six.
Though economic factors are to blame, it’s also about the shift in consumer preferences, as well as shortages of mid-life used vehicles. Vehicle buyers are still passionate about owning trucks and SUVs, which have higher sticker prices than sedans. The owner of a used vehicle in the United States is now paying a record high average of $400 per month for a loan. In addition, loan terms are getting longer: the average today is 66.9 months, which is a record. Analysts say that customers truly shopping for a low-cost deal consider a used sedan rather than a truck or SUV.
There’s evidence that dealers are aware of consumers’ increasing desire for used vehicles and are acting accordingly. In a recent survey of dealers conducted by Cars.com, a majority of respondents said they were putting more resources behind their used-vehicle departments, including more staff, more marketing and advertising, and better use of platforms designed to match buyers with used vehicle inventory. Data by NADA has found that the used-to-new-car sales ratio for the average franchised dealership has risen significantly since 2015.