Prices Are Down
As reported here at CarGurus, the average price of a used car is down approximately 3 percent from the annual peak in May 2015. Prices are projected to drop by another 1.5 percent through the end of January.
Don’t delay, though. As mentioned in more detail below, you might want to get that used car before Dec. 31, if possible, for tax reasons.
But Prices Will Rise
There’s another reason not to delay. Starting in February, used-car prices start to rise and will continue doing so through at least the beginning of May. Why’s that? Easy money hits the market in the form of income-tax refunds. People will use their refunds for down payments, thus driving up demand.
One factor that should ease the price increases somewhat is that supply is still strong. This is shaping up to be a record year for new-car sales, which means a steady supply of used cars is getting traded in. The new-car market can spike at this time of year as dealerships push great deals to beef up year-end numbers. That means they should have a strong supply of used cars going into January.
Another reason to buy a used car now is that Congress just this month approved the sales-tax deduction. So if you live in a state with a high sales tax, you might want to buy a used car now, according to MarketWatch. As always, consult your tax advisor to see if this is to your advantage.
Look to Luxury Savings
Black Book Market Insights is a research publication that tracks weekly trends in the used-car business. Its most recent report looks at more end-of-year trends with a focus on a handful of luxury segments. It says they are showing late-year heavy depreciation compared with other car segments.
The luxury segment is acting the way it is because of strong supply. In addition, buyers are able to afford more in terms of their budgets, which means new luxury vehicles are attractive, especially given that a higher percentage of them are leased than in any other segment.
Compact SUV Savings, too
Compact SUVs are also showing heavy depreciation in the trucks category. According to Black Book Market Insights, the compact SUV segment saw the largest depreciation of all car and truck segments with a $281 drop or a 1.52% decrease from last week.
Compact SUVs are a victim of lower gas prices. People want larger vehicles, and gas prices falling from $4 to $2 a gallon in the last couple years has put more money in consumers’ pockets. They can funnel that money into higher car payments.
Don’t Need a Crossover?
As the research here shows, CarGurus analysts note that the greatest savings for consumers will be found on small and midsize cars. Ask yourself if you truly need a crossover. If you can live with a sedan, you can find some great deals on some really good cars that are priced right.
As always, CarGurus suggests that consumers research price, vehicle history, and dealer reputation any time they shop for a car. By visiting the CarGurus site and using the company’s mobile app, shoppers can search local listings and quickly identify the best deals from top-rated dealers.
Shopping for a new vehicle this weekend?
Bring along CarGurus’ mobile app to help check prices, find good deals, and research cars on your smartphone.