Consumer Alert: Used car prices skyrocketing due to COVID-19
ROCHESTER, N.Y. (WHEC) — This consumer alert concerns the cost of that "new-to-me" car. That’s what I call my used car purchases, “new to me.” I usually buy cars that are three to four years old because cars on average lose 20% to 30% of their value in the first year and half of their value by year three or four.
But when you buy used, you have to do a careful cost-benefit analysis. Your purchase cost will be lower but your maintenance cost will be higher. And in today’s market, that cost-benefit analysis is so much tougher. Used car prices are sky-rocketing. It’s the COVID effect.
The issue is three-fold. First, during the lockdown companies canceled their computer chip orders. It takes months to catch up, straining new car inventories and pushing people to the used car market. Secondly, pandemic-panicked people are holding onto that leased car longer. And you’ll remember I told you early in the pandemic that Hertz and other rental car companies sold off huge chunks of their fleet, so now rental companies putting fewer cars on the market.
So if you need a new car or a car that’s “new to you”, should you make the leap? It’s a question I’ve been studying for you and for me. My used car named Gertrude was a great buy. But she’s now eleven years old which means my maintenance costs could soon make the car not worth keeping.
And here’s something else to consider. People are still buying used cars despite the sticker shock.
According to the research firm J.D. Power, the average price of a used car in April was $25,463.
That’s $2,800 more than last year… and the first time the cost has ever been more than $25,000. But get this. Consumers are getting far more for their trade-ins. According to Edmonds.com, the average value of a trade-in reached a record $1,780 in March. That’s $3,000 more than a year ago.
So if you’re paying more for the car but getting more for the trade-in you could break even.
If you decide to make the leap, with the help of Consumer Reports, Here’s Deanna’s Do List:
- First, after you test drive the car, have it checked by a mechanic. I called 10 auto repair shops with good reputations with the BBB, and the price for a pre-purchase inspection runs from $20 to $130. And if that helps avoid buying a money pit, that’s a few bucks well spent.
- Goodyear, A+ BBB rating, $62.50
- Chili Automotive, A+ BBB rating, $125.00
- Independence Car Care Center, A+ BBB rating, $59/99
- Lewis General, A+ BBB rating, $19.95
- Vesa’s Automotive, A+ BBB rating, $55
- Rytek Automotive, A BBB rating, $80.00
- Schoen Auto, A+ BBB rating, $78 or $130
- Tony’s, A+ BBB rating, Manager didn’t quote a price.
- Check the car’s title first. You want to make sure the seller owns the car.
- Get a vehicle history report. If the car is registered in New York, click here to get it for free. If the car is registered out of state Carfax is $40, and AutoCheck is $25.
- Check for recalls. You can do that for free by clicking here.
- Contact the previous owner. Consumer Reports recommends this. I’ve not done it before but it sounds like a great idea. And Consumer Reports says don’t believe it if the dealer says federal law forbids the release of past owner information. That’s not true.
So you may be wondering whether I’m going to keep Gertrude or give the ‘ole gal the boot. I’m keeping her. Gertrude looks like two elementary-aged kids have been living in her for seven years, so my trade-in value won’t be great. But she’s well maintained and still purrs like a kitten, and analysts say in a year the market may have cooled enough to get a reasonable price on my next "new to me car." Before making the leap, those are all the things you need to consider as well.
And that’s your consumer alert.