by Dana George | Published on Aug. 3, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
It may be a tough time to buy a used car, but it's certainly not impossible.
One of the fallouts of COVID-19 is a semiconductor shortage. This shortage means fewer new cars manufactured and a greater demand for used vehicles. And this is where things get sticky.
According to Car and Driver, the cost of a used vehicle increased by 30% since this time last year. Equally dramatic, used car prices are up 17% over the past five months. In fact, the average price for a used car hit $22,568 in May, an all-time high for preowned vehicles.
While it may be tough to find a good deal on a reliable used car, it is not impossible. These tips are designed to give you a fighting chance as you shop for a used car.
It may be time to switch up strategy. Think about the vehicle you would have undoubtedly wanted to purchase if there’d never been a microchip shortage and if the price of used cars had not shot up. If it’s a pickup truck or SUV, it could be tough to find what you're looking for at a decent price. The demand is simply too great and the supply too limited.
According to Forbes, the price of used pickups is through the stratosphere. For example, a 2018 Ford F-150 pickup now costs nearly $10,000 more than a 3-year-old model cost last year. However, small crossover SUVs and cars have not risen in price quite as dramatically.
You may want to consider a less in-demand model that appeals to you. One good place to start is Kelley Blue Book. The vehicle valuation company curates a monthly list of the best used car deals. The idea is to use a list like this one to spark your imagination and learn if another vehicle could inspire you. The bonus is that cars featured on Kelley’s list are available at a discounted price.
Today’s high prices may spell bad news for those looking to buy a car, but it’s a great time to be a seller. The premium you make selling your vehicle can help balance out the extra money you may need to shell out for another used car.
There was a time when there were three primary ways to find a used car: Visit a used car lot, check the want ads, or buy from a friend. Today, your options are wide open.
In addition to car lots and friends, you have dozens of online shopping tools. In fact, you can shop from anywhere in the country and have the car sent to you. Sites that allow you to shop for vehicles that fit your style and budget include:
In addition to these sites, continue to look for cars for sale by owner, as you may find a reasonable price there. Wherever you buy, retain the right to have the vehicle thoroughly inspected before completing the deal. That way, if there are problems, you know how much it will cost to make repairs and can decide if you’ve genuinely landed a bargain or not. While you're at it, you can even get an auto loan from the comfort of your home.
If you need wheels now but would like to wait until prices stabilize, consider leasing a car for one year. Yes, you’ll have to put money down, but your monthly payment will be lower than it would be with a purchase. Enjoy your lease for one year before you begin shopping again in earnest. Hopefully, you’ll have a strong sense of the vehicle you want by that time, and the price will be manageable. And, if you keep your monthly lease payment low enough, you’ll have another year to save for the other costs associated with owning a car.
One caveat: Typically, leasing a car is not your best financial move. That said, these are unusual times, and leasing could work in your favor. Before you decide, add together all costs associated with leasing (including the down payment, fees, and monthly payment). Compare that price against what you’ll spend this year if you purchase a car (including down payment, fees, and monthly payment).
Finally, if you can make your current car last a little longer, do your best to make that happen. The price of used vehicles is bound to drop to (or near) pre-pandemic prices eventually. Waiting could lead to a plumper savings account and a larger down payment.
As you know, there's more to owning a car than making monthly payments. You must also pay for auto insurance, maintenance, and upkeep. Through it all, you want to enjoy your ride. Don't allow the hunt for the "right" vehicle discourage you. Remember, you have options.
Auto insurance is something that most people don't think about very frequently. While there are several factors that drive people to look to change auto insurance carriers, it is important to educate yourself in order to ensure you select the right coverage for you. The right coverage means not paying for coverage you don't need and not foregoing coverage that would make sense for your personal situation. While price is a major factor, we also consider other factors such as customer service and the claims process when choosing what we think are the best auto insurance providers.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.