Consumers pay an average of $10,000 above “normal” prices for used cars

JimWatson | AFP | fake images

It’s no secret that used car prices have skyrocketed in the past two years amid an industry upended by supply chain problems and shrinking new-car inventory.

But how much extra are consumers paying? An average of $10,046 more (43%) than if typical depreciation expectations were in play, according to a June 30 price snapshot in the Index “Back to normal” Launched by CoPilot, a car shopping app.

The median price of a used vehicle is $33,341, up 0.5% from May and just $172 below the March peak, CoPilot research shows. If depreciation forecasts had come to pass, the average price would be $23,295, according to CoPilot’s index.

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“Despite signs of a slowing economy, rising interest rates and high fuel prices, the used car market is holding strong,” said Pat Ryan, CEO and founder of CoPilot.

Consumer purchases remain strong, at least in part, due to indirect market demand for new cars. Supply chain problems, primarily a continuing shortage of computer chips, have left dealers with fewer new vehicles to sell.

It’s a ‘long way back to normal’

The amount consumers pay above normal also depends on the age of the car. Nearly new vehicles (1-3 years old) have an average listing price of $42,314, which is $13,145 more (45%) than the projected normal amount of $29,169, according to the CoPilot Index.

By contrast, vehicles between the ages of 8 and 13 have an average price of $18,038, or $5,416 more (43%) than the previous forecast of $12,622. That category is the only age segment whose average price has been trending down for several months.

“While there are some segments showing initial signs of softening, the used car market as a whole still has a long way to go to get back on track,” Ryan said. “Despite a number of challenges facing the broader economy, the market has not softened to the extent that might have been expected.”

How to get the best price on a new or used vehicle

For buyers, having a trade-in is your best bet for lowering the price of a car, new or used. Average trade-in capital is estimated at $10,381, a 49.2% increase from a year ago and the first time above $10,000, according to a joint forecast from JD Power and LMC Automotive.

Be prepared for hefty monthly payments, though: They average $678 over 70.3 months (a couple of months before six years) for new cars and $555 over 70.8 months for used vehicles, according to the most recent data from . Interest rates have also risen and now average 5% for new car loans and 8.2% if you borrow to buy a used vehicle.

If you’re looking to buy a new (or used) vehicle, here are some tips from Edmunds:

  • Know your trade-in value. An exchange’s additional capital is its greatest trading tool in today’s market.
  • Know your pre-approved interest rate (i.e. from a credit union or bank). Even if you have excellent credit, it’s good to get pre-approved for a loan and know what interest rate you qualify for, which helps determine how much car you can really afford, and then see if a dealer will match or beat the rate you can go elsewhere.
  • Know your overall budget. With prices and interest rates going up, you may not be able to afford as much car affordability as you think. Consider costs other than monthly payments, including depreciation, taxes, fees, fuel, maintenance, and repairs.
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