In the second quarter of this year, the proportion of used car sales under $20,000 in the United States has dropped to 32%, significantly lower than the 55.2% during the same period in 2019. This decline is forcing car buyers to carefully weigh price and the condition of the vehicle they are purchasing.
According to CNBC citing data from Edmunds, lower-priced used cars also spend less time on the market: used cars priced between $5,000 to $10,000 typically stay on dealership lots for an average of 25.4 days, while those priced between $20,000 to $25,000 linger for 37.8 days, and cars priced over $50,000 take as long as 44.3 days to sell.
This trend reflects consumers’ preference for seeking more affordable vehicles amid inflation and the overall economic environment in the United States. Market research firm Cox Automotive data shows that the average listing price of used cars in the United States in July this year was $27,028.
CNBC reported that in July of this year, the prices of used cars were approximately 29% higher compared to July 2019 (pre-pandemic), which is in line with the overall inflation rate reflected by the U.S. Consumer Price Index (CPI) during the same period.
Karl Brauer, a senior analyst at iSeeCars, stated that the current high prices of used cars are a significant example of the affordability challenges consumers face. He also mentioned that purchasing older used cars may come with increased maintenance and repair costs.
Joseph Yoon, a consumer insights analyst at Edmunds, told CNBC that lower-priced used cars typically have older age and higher mileage. Edmunds data for the second quarter of this year shows that the average age of used cars in the price range of $15,000 to $20,000 was 6 years with an average mileage of 71,192 miles, a significant increase from 3.4 years and 41,851 miles in the same period of 2019. In the price range of $10,000 to $15,000, the average age of used cars this year was 8.7 years with an average mileage of 98,222 miles, much higher than the 4.7 years and 58,250 miles in 2019.
A report from credit reporting company Experian showed that in the second quarter of this year, the average interest rate for used car loans was around 11.2% with an average loan term of 5.6 years, while the average interest rate for new car loans was 6.4% with an average term of 5.7 years. The report indicated that the average loan amount for new car buyers was $43,610 with a monthly payment of $765, whereas for used car buyers, the average loan amount was $27,852 with a monthly payment of $542, and approximately one-third of used car loans had monthly payments below $400.
Experian data also showed that buyers with credit scores below 500 had an average interest rate of over 21% for used car loans. Analyst Yoon suggested that when deciding on the loan term, car buyers should consider the expected lifespan of the vehicle; if purchasing a 7-year-old used car with a 6 or 7-year loan term, buyers may still owe money on the loan if the vehicle is scrapped early or roll it over into the loan for their next vehicle.