The average price of a used car in 2022 is $34,429, according to iSeeCars.
That's up considerably from 2021; the average retail selling price of a used car in 2021 was $26,709, according to the National Automobile Dealers Association (NADA). The average price of a used car in 2019 was $22,027.
The price jump between the two years is significant, showing that used car prices are on the rise. According to their records, Kelley Blue Book reports a 28 percent rise in used car prices between 2020 and 2021 and a 42 percent increase between December 2021 and December 2019.
This data is excellent for both used car shoppers and sellers, especially if you have wondered, "how much should I pay for a used car?" Let's take a closer look at just how much is a used car these days.
Understanding the Current Used Car Market Increase
So, why the big jump in prices for used cars at the end of 2021?
Several factors influenced higher used car prices, including the following:
New vehicle shortages occurred during the COVID-19 pandemic due to lower production levels at factories. Workers were often furloughed due to state or local restrictions, forcing them to stay at home.
As vaccines became more widely available for the coronavirus, the U.S began withdrawing from the economic downturn, which was spurred by the worldwide COVID-19 pandemic. With the economy moving again and gaining financial stability, more Americans sought to purchase used cars. The rise in demand created an increase in sticker prices for used vehicles.
There has been a global shortage of imported parts needed to build cars in U.S. factories, such as the electronic chips that control things like fuel economy and infotainment systems. The microchip shortage has left automakers in trouble with a limited car inventory of new vehicles. They cannot manufacture new cars quickly enough to meet the demands of the automotive market.
In 2019, 1,026 new light vehicles were sold at an average price of $36,824. In 2021, that number dropped to 895 new cars sold at a listing price of $42,379. Most automakers use the microchips they can get to build their highest-margin or profit vehicles. This means there are fewer cheaper new cars on dealership showroom floors, so customers are now driven towards affordability in the used car market.
Automakers built fewer cars for several years after the 2008 recession period. This resulted in the cheaper used car market taking a dip with its own problems. The used car market has fewer old cars with higher mileages that dealers and private sellers could retail for less than $10,000 or less. With inexpensive old cars in short supply and more car buyers wanting to purchase used vehicles with a new-car budget, used car values soared, and depreciation is not nearly what it used to be.
According to Consumer Reports, the demand for used vehicles will probably continue as car shoppers seek out cars to buy with their stimulus checks or long-awaited refund checks from the IRS (the agency has been behind processing income tax returns from 2019). Consumer Reports say that a calmer market will come, but it will take time to return to normal.
J.D. Power, the well-respected consumer intelligence agency, says that car prices, including used cars with warranty coverage, will continue to rise, despite the easing of the pandemic and the restrictions brought by it. According to J.D. Power, there will be a modest increase in used car prices for years to come.
Although the agency agrees that the current spike in prices for used vehicles and certified pre-owned cars is an anomaly, it says that car inventory issues and increased costs of production are bound to keep prices for used vehicles above their normal average. In fact, it says that the inflated prices seen in today's market may become what it calls "the new normal."
How Much is a Used Car?
As of April 2022, the average retail selling price of a used car was $34,429 according to iSeeCars. For vehicles that are one to three years old, the average cost is $41,121. New cars and light trucks are, on average, $15,700 more expensive than used light vehicles.
If you are financing a used car, it would be helpful to know that the average vehicle auto loan amount for a used car was $27,291 at the end of 2021.
If you have a used car insight and are unsure what the market-related value is, you can look online.
You can do research for average and market-related used car values on the websites below:
- Kelley Blue Book
- NADA Guides
- Auto Trader
- Consumer Reports Car Value Estimator
- Carfax (Carfax gives you a VIN-specific price for every used car based on its complete history)
You can conduct research on these sites by entering information about the used car you are looking for, such as the mileage, options, and condition, or find a vehicle listed online and plug in the options it has listed. The car value sites will give you several used car prices; new, trade-in, and retail. Retail will get you the closest car's value to a price you'd expect to pay.
Additionally, you can find out more about the car you are considering by plugging its VIN (vehicle identification number) into a VIN decoder. Information such as the vehicle's model year, type, trim level, and more can be ascertained with a quick VIN check.
Affordable Used Car Shopping
Car buying is a complicated process for some people, but it is easier now that we have the technology and the internet at our disposal. You can even buy a used car or take out a car loan in the comfort of your own home using a website or smartphone app.
However, there are special considerations to keep in mind when buying a used car, including car insurance, budget, annual car costs, trade-in decisions, model year preference, if you have a down payment or need an auto loan, used car market values, and more.
Budget is a significant factor, so most car buyers turn to used car shopping instead of buying a brand new vehicle.
Affordable Body Styles
The microchip shortage is expected to last through 2022. So, what is the most affordable option if you want to purchase a vehicle?
The best advice to avoid major price hikes in the future is to choose a used car that isn't high in demand, such as a sedan. SUVs and pickup trucks are high in demand and carry a higher asking price.
Affordable Makes and Models
In the same way, as certain body styles command a higher sticker price, certain makes and models are more popular than others.
Popular makes and models carry a higher asking price too because of their increased used car sales. iSeeCars conducted a recent study to discover the ten best-selling used cars in the U.S.A.
The below models made up 21.3 percent of all used car sales for 2021:
- Ford F-150
- Chevrolet Silverado 1500
- Ram Pickup 1500
- Honda Civic
- Nissan Rogue
- Toyota Camry
- Chevrolet Equinox
- Ford Escape
- Toyota Rav4
- Honda Accord
Typically, the average price of the above makes and models will be higher than vehicles that are less in demand. The model year is also a large determining factor. Recent models (within the last three years carry an average cost of $41,121. So, it is better to choose something older than three years.
Affordable Locations (States)
Where you purchase your used car will affect the average cost of the vehicle. It is cheaper to buy a car in some states compared to others.
Connecticut has the lowest average used car price of $30,652.
Montana has the highest average used car price of $42,417.
The used price increase isn't consistent throughout the country either. Some states have seen a higher increase in the average used car prices than others.
Delaware has the lowest year-over-year percentage price change of 28.8%.
North Dakota has the highest year-over-year percentage price change of 43.5%.
Affordable Sellers / Car Dealers
It matters where you buy your used vehicle from. A dealership may carry a higher sticker price than a private seller because it is easier to negotiate a better price with a private party. However, each has its own set of risks. Do your research first across different car dealers and private sellers before deciding where to buy your chosen make and model used car.
Deciding Which Used Car is Right for You
Now that you understand how popular makes and models, model years, and body styles may affect the cost of your used car, it may be easier to decide which used car is suitable for you and your price range. Ideally, if you are on a tight budget, a four to seven-year-old sedan would be ideal, and preferably one that doesn't fall on the list of popular cars.
If you are still unsure and your budget is not too restrictive for a used car, turn towards reliability. Having a reliable used car with low annual costs will save you money in the long run. Take some time to research reliable vehicles online.
There are many websites to choose from that review and discuss cars, whether it is an official evaluation from an automotive site such as Autolist or people who own the vehicle and post about their experience with it in car buying forums. You might also try choosing a vehicle that interests you based on lists of recommended reliable cars.
If you know what type of vehicle you would like, then learn about its service reports and any common repairs. Once you have decided on a specific car, finalize the transaction until you have obtained a vehicle history report to find out about any particular issues or accidents. Finally, always take it for a test drive.
Paying for Your Used Car
You would have established your budget or maximum price range for a used car at the start of your car-buying journey. If you are paying cash, set a purchase price you will not go over so that you don't have to worry about finances and auto loans.
Be firm on your limit and be patient when a purchase doesn't work out because of a seller with a firm price. Since you are paying cash, why not ask the dealership or private seller if they would be open to discounting the price since they would benefit from a quicker transaction.
If you have a used vehicle to trade in, it will act as a down payment toward your next car. Don't sell yourself short on your trade-in. Research its value beforehand and ensure you get a fair price for it. The higher prices for used cars have generally meant getting more on a trade-in in today's market.
According to a joint estimate from J.D. Power and LMC Automotive, the average reached $9,852 in January 2022, an 88% increase of $4,611 from a year ago. The used car market may be more expensive, but that s good news if you have a trade-in or if you are trying to sell your used car privately.
Purchasing a used car with financing is typically done with a car dealership. Know your price limit and never allow the salesperson to negotiate the monthly payment to fit your budget. A longer financing term or higher interest rates can cost you much more after paying off the car.
According to NADA, the average monthly payment for a used car was $488 at the end of 2021. This amount is up from $417 at the end of 2020. The average loan term at the end of 2021 was 67 months. The average interest rate was down at the end of 2021 from 8.41% to 8.21%.
If you buy the car from a private seller, you can still finance your purchase. You can obtain a Private Party Auto Loan from your lender, bank, or credit union. You do have to have a car picked out before applying, though.