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- The average cost of a financed used car has risen significantly since the pandemic began.
- While the car you drive might have gone up in value, Americans are paying a lot more for cars now.
- Even if the price of a used car comes back down, you might still get hit by high interest rates.
While surging car prices were initially due in large part to chip shortages, car manufacturers have faced a bevy of problems that have interrupted car production. As a result, many consumers have been seeking out used cars.
Some data does show that used car prices are beginning to drop from their peak, but today's higher interest rates mean buyers aren't saving any money.
Americans' cars are worth $313 billion more than 2020
Many of the used vehicles on America's roads are worth considerably more now than they were last year. That's even more true if you go back to 2020 — the year the pandemic began. We can tell this by the average values of used cars sold and purchased during 2020, 2021, and 2022, which is laid out each quarter in Experian's State of the Automotive Finance Market report.
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Either way, consumers on the hunt for a used car are paying more, and sellers are reaping the benefits. Experian found the average value for financed used cars came in at $20,263 in 2020, followed by $26,295 in 2021 and $27,736 in 2022.
According to data from Hedges & Company, the average age of a car on the road is now 12.1 years old. However, you're unlikely to be able to finance a car that's older than 10 years old. Most new car sales are financed, but since the pandemic began, the proportion of used cars that are financed has dropped.
That means that while many used cars likely haven't appreciated in value, newer cars have risen in value significantly. All the used cars that were financed last year are worth a collective $1.5 trillion — $313 billion more than they were worth in 2020.
According to Experian, buyers of used cars paid an average loan rate of 8.39% in 2020, followed by an average rate of 8.12% in 2021 and 9.34% in 2022. This increase in rates accounts for part of the increase in monthly payments for all used vehicles combined, along with the increase in used car values year-over-year.
That $313 billion is good for some Americans, but bad for most
If you are looking to buy a used car but don't need it immediately, it might be a good idea to wait for now. Prices could come down after tax refunds are received and the spring car-buying season is over.
On the other hand, if you're thinking about selling your car, you might get a lot more for it than you did just a few years ago. For most Americans, increased prices and interest rates just mean they'll have to pay more.
According to the US Census Bureau, 77.9% of households have two cars or fewer. If you're in the 22.1% of households with three or more cars, this could be a chance to downsize and get some of that $313 billion in increased value for yourself. For everyone else, though, that $313 billion is probably just bad news.
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March 03, 2023 at 08:48PM
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Used Cars Are Worth $313 Billion More Than When the Pandemic Started - Business Insider
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