If you have a fairly new used car, you might be surprised. Your car probably has increased in value.
Values for used vehicles have risen in the past six months. This is a rare trend for an asset that typically and consistently loses value. The average new vehicle sheds 40% of its value in three years, yet Americans’ three-year-old cars and trucks saw values increase 3.2% in the past six months, according to new research from CarEdge.com, a startup listings platform and research site focused on depreciation.
The average listing price of used vehicles was $21,558 in July, up $708 from June.
Why this rare anomaly? Among them are that buyers are flooding the used-car market, looking for deals amid high prices for new vehicles, low interest rates, and a shortage of new-vehicle inventory, according to car-research site Edmunds.com.
Auto plants were shut down for two months this spring in response to the pandemic which has led to a decrease in inventory and a delay in the delivery of 2021 vehicles. In addition, demand is high due to low interest rates and possibly stimulus check money.
Any hope the rental-car company Hertz's Chapter 11 bankruptcy filing this year would cause in a drop in used-car prices has diminished due to the overwhelming influence of COVID-19 on the market.
“It’s a seller’s market right now," Drury said. "Although used vehicles continue to offer significant discounts compared to new, used-car shoppers will find themselves in the unusual position where they might not have as much negotiation power because demand is so high and dealers will be less inclined to be flexible."
He advised buyers to be prepared to act quickly if they see a used car they want.
Average Age of Cars on the Road Approaching 12 Years
Vehicles on the road have only been getting older, a study from IHS Markit found, in part due to slow new-vehicle sales during the pandemic.
A study from IHS Markit found that the average age of vehicles on the road rose to 11.9 years this year, one month older than in 2019.
Fewer new-vehicle purchases as a result of the pandemic coupled with vehicles lasting longer and increases in prices have pushed the average age of vehicles on the road higher. The average price of a new vehicle in January of this year was $37,851, a 3.5% increase from January 2019, according to Kelley Blue Book.
New vehicles made up 6.1% of vehicles on the road last year; IHS Markit predicts they will be closer to 5% this year.
In the last decade, the average age of vehicles on the road has steadily risen after jumping in response to the recession in 2008.