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Consumers pay an average of $10,000 above ‘normal’ used car prices

Consumers pay an average of $10,000 above 'normal' used car prices

Jim Watson | AFP | Getty Images

It’s no secret that used car prices have risen over the past two years in an industry shaken by supply chain problems and a dwindling supply of new cars.

But how much do consumers pay extra? An average of $10,046 more — 43% — than when typical depreciation expectations were in play, according to a June 30 snapshot of prices in the “Back to normal” index released by CoPilot, a car shopping app.

The average price tag for a used vehicle is $33,341, up 0.5% from May and just $172 below its March peak, the CoPilot survey shows. If the depreciation projections had come true, 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 up,” said Pat Ryan, CEO and founder of CoPilot.

Consumer purchases remain strong, at least in part due to overflow demand from the new car market. Supply chain problems – mainly a continued shortage of computer chips – have resulted in many dealers having to sell fewer new vehicles.

It’s a ‘long way back to normal’

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

By contrast, vehicles ages 8 to 13 have an average price of $18,038, or $5,416 more (43%) than the previously forecast $12,622. This category is the only age segment whose average price has been on a declining trend for several months.

“While some segments are showing the first signs of weakening, the used car market in general still has a long way to go back to normal,” Ryan said. “Despite some challenges facing the economy as a whole, the market has not softened to the extent expected.”

How to get the best price for a new or used vehicle?

For buyers, trading in is the best choice to bring down the price of a car – new or used. According to a joint forecast by JD Power and LMC Automotive, the average trade-in equity is an estimated $10,381, up 49.2% from a year ago and the first time above $10,000.

Be prepared for sizable monthly payments, though: They average $678 over 70.3 months (a few months shy of six years) for new cars, and $555 over 70.8 months for used vehicles, according to the most recent data from Edmunds .com. 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 in the market for a new (or used) vehicle, here are some tips from Edmunds:

  • Know your trade-in value. The extra equity from a trade-in is your largest negotiating tool in today’s market.
  • Know your pre-approved interest rate (ie 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 actually afford — and then see if a dealership can match the rate. that you can go elsewhere.
  • Know your total budget. With higher prices and interest rates, you may not be able to afford as much car as you think. Think of costs in addition to monthly payments, including depreciation, taxes, fees, fuel, maintenance and repairs.