American motorists are turning their back on new vehicles in favor of buying used cars as the coronavirus pandemic and resulting economic fallout continues to impact purchasing behavior. According to the latest data (opens in new tab) from ALG, total retail auto sales for July 2020 are expected to remain 15% down from a year ago. But while it’s proven a difficult year for the new vehicle market, used car sales are taking up some of the slack, with July’s figure expected to be 9% higher than the same month last year.
Why are used car sales rising?
Amid lockdowns and the rise of working from home, vehicle usage plummeted in the early stages of the crisis - some states reported 90% less traffic on the roads in March due to the stay-at-home orders, with motorists receiving billions of dollars in auto insurance refunds (opens in new tab) as a result. While car usage has picked up since, the problem facing the auto industry now is that rising unemployment and impacted incomes has left many either reluctant or unable to invest in a new car. At the same time, COVID-19 has brought about significant change in most American’s everyday lives, from the way people work to how they socialize, and altered people’s perception of what they need from a motor vehicle.
Nick Woolard, Director of OEM and Affinity Partner Analytics at TrueCar, of which ALG is a subsidiary, said: “As consumers seek more cost-effective options while shopping, used vehicles continue to show strong recovery, up 9% year-over-year and roughly in line with June.
“Lower than average inventory levels on new cars as well as economic uncertainty may be causing some consumers to opt for used vehicles. TrueCar marketplace data shows similar trends, with 11% of consumers who connected with dealers for pricing on a new vehicle ultimately purchasing a used vehicle. This is up 31% versus July 2019.”
What do used car buyers need to consider?
The gradual shift from new to used is understandable, and with nearly 40 million used vehicles changing hands in the US each year, anyone thinking of doing so is in good company. However, with such a wide choice, finding the right car can prove a challenge. So, what do you need to consider if you’re thinking of buying a used car?
1. How much have you got to spend?
In such unusual economic times, not overstretching your finances is obviously crucial. The good news is that the cost of the best auto loans (opens in new tab) is low right now, but as a general marker, anyone thinking of taking out a loan to pay for a car should make sure their monthly payment is no more than 20% of their take-home pay. Obviously, your own circumstances will dictate what you can afford, but remember that a used car will also likely need a little extra attention too, whether it be for new tires (opens in new tab) or general maintenance. And then there are the fuel costs and auto insurance (opens in new tab) to pay for as well.
2. Finding your new car
As we’ve already said, the choice in the used car market is vast, so narrowing down your search is a must. Consider which brands you like, and which seem to offer the most reliability - fuel economy might also be important if you travel a lot of miles. Check out review sites to see which cars seem to stack up the best for you, and then start comparing prices to find out whether they fit in your budget - and remember not to spend more than you can afford.
3. Before you buy
Once you’ve identified a suitable vehicle, you’ll need to try and work out what type of condition it is likely to be in. Taking the word of a private seller or an auto dealer is never proof enough that a vehicle is in good shape. A site such as AutoCheck, which compiles vehicle history reports, should definitely be looked at before buying. The test-drive is also vital in being able to assess whether the car is right for you, and for trying to identify any potential problems there may be with its condition. Are there any lights flashing on the dash that shouldn’t be, how do the brakes feel, what condition are the tires in? If you don’t know what to look out for, take someone with you who does, or consider paying for a pre-purchase inspection.
4. Negotiate a good deal
While you might just have fallen in love with the car that you’ve just driven, or think you’ve spotted a bargain, always try and negotiate the price down with a seller. With auto dealers, in particular, remember that they aren’t selling as many cars as they were before, so they won’t want you to walk away without buying from them if they can help it. Dealers will know they have to compete for your business, and the cheapness of auto loans is testimony to this. As you are one of a smaller pool of buyers, it means now is a good time to buy a car (opens in new tab), so you use it to your advantage.
5. Seal the deal...and some peace of mind
An auto-dealer can be expected to have all the necessary paperwork to hand for the purchase - depending on how you intend to pay, you may need to have details of your auto loan provider at the ready, and also remember that you’ll need auto insurance to drive away in your new car.
Most people buying an older car will also be well-advised to arrange some extra protections for their new purchase. While most vehicles are now built to last, purchasing one with miles already on the clock means many will want the extra peace of mind that the best extended car warranties (opens in new tab) can afford, should anything break down. Always check with the car dealer where the vehicle stands in terms of its original warranty, and consider taking out an extended warranty if it’s already expired or will do soon.
The other safety net anyone buying a used car might be wise to invest in is the services of the best roadside assistance plans (opens in new tab). The second-hand vehicle you’ve just bought might seem like a reliable runner, but you never know what’s around the corner. Most people would surely choose the reassurance offered by a reliable roadside recovery company rather than being left stranded at the side of the highway wondering who to call should their car let them down.
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