The Used Car Market Crash: What you Need to Know
You should start preparing
It’s been a little over a year since we’ve seen anything close to resembling stability in the used car market. Prices have been on the rise for months now, and don’t seem to be showing any signs of stopping any time soon.
In fact, according to recent reports, the average cost of a used car is expected to reach $30,000 by the end of 2022! That’s an increase of 42% from before the pandemic.
So what does this mean for American consumers?
The Next Used Market Crash
Is not coming.
What? You didn’t get the memo?
Used car prices for desired cars are not going to drop significantly or at all. In fact, prices may even go UP EVEN MORE. Here’s why:
- The number of people who need or want a car has not decreased. In fact, in many cases, it has increased.
- The cost of new cars has also increased significantly. Even with the semiconductor chip shortage getting better, car markets now have to deal with the supply chain disruption due to the Russian-Ukraine war.
- The supply of used cars has not increased, meaning that there is still high demand and low supply.
The simple solution is for consumers to stop buying cars when price gouging is going on. If only it were that easy.
Although the used car market is in a bubble, and bubbles do eventually burst, there won’t be a crash. That’s just not how that particular market behaves. Because it’s nearly impossible to reduce consumer demand, you should start getting used to these prices.
What You Should Do Now
Don’t buy.
I’m sure you won’t find this hard to believe, but buying new cars is one of the worst financial decisions a person can make.
Put that car payment money in the bank or pay down other debt. Use it to pay down high-interest debt first, then pay down the principal on real estate. You should use this time to Invest. The stock market is at historic lows.
“Millionaires are made in Recessions” — Unknown
And if you absolutely need a car let us reiterate: DON’T BUY. Lease instead.
You’re better off leasing or renting over the next few years if your goal isn’t getting stuck with an expensive vehicle that will quickly lose its value as soon as it leaves the dealership floor. Leasing is cheaper than buying, and you can always upgrade to a new model when your lease is up.
Think of it this way: right now is NOT the time to burn a hole in your wallet. And with leasing, you won’t be spending as much money on a car that will likely be worth less in just a few years.
Of course, this is all just our opinion. But we’re not the only ones who feel this way. Many financial advisors recommend leasing over buying during times of market instability — like the one we’re currently in.
The Choice is Yours
The used car market is fascinating and ever-changing, but one thing is for certain — if you’re thinking of buying a used car in the near future, you better be prepared to pay top dollar. And if you’re not? Well, you might just have to wait a little while longer for a price drop that may or may not happen.
Sure the used car market may be volatile, but it’s not going to crash. Prices may rise and fall, but they’re not going to drop significantly. So if you can hold off on buying a car, you’ll be better off
‘It’s not a great time to buy either a new or used vehicle” — George Hoffer, Ph.D., a professor of transportation economics at Virginia Commonwealth University.
If anything, now is the time to lease or rent while prices are too high to buy cars. This way when the market does drop, if even just a little, you can buy the car off your lease with the cash you save up now.
Be patient, be smart with your money, and don’t let anyone take advantage of you. We promise, your wallet will thank you later.
