SHOPSMART AUTOS – CUSTOMER INFORMATION – JUNE 2, 2021
Be prepared to buy today.
Having said that, if you find what you want, you may need to act quickly before it’s gone. Check out your credit rating in advance and get pre-qualified for financing. Even when prices aren’t this high, it’s always better to go into the process with a realistic idea of how much loan you can qualify for and afford.
Be flexible on lower-priority “wants.”
With inventories low, shoppers might have to compromise on color, mileage, or features, said Matt Smith, deputy editor for CarGurus Inc. “Determining needs vs. wants will help increase the number of applicable vehicles within a search radius,” Smith told Forbes Wheels.
Check out return policies.
You can reduce the risk of a hasty purchase by taking advantage of used-car marketers that offer return policies of seven days or even longer. Those include online-only outlets like Carvana or Vroom, plus a growing number of dealership groups now offering digital sales, like Lithia Motors’ online channel, called “Driveway.” Earlier this year used-car giant CarMax extended its seven-day return policy to 30 days. New car buyers have been trending away from midsize and compact cars for the last few years, but these segments may offer some of the best deals in the current environment, and there are many capable choices. Getty
What Goes Up May Not Come Down For Awhile
Conversely, one common tip—simply to wait a while, until prices come down again—might not apply this year. In a normal, pre-Covid year, used-car demand and used-car prices typically hit their peak for the year in the spring tax refund season, with prices normally falling by early summer. This year, with government stimulus checks, on top of tax refunds, on top of pent-up demand for used cars, on top of higher household savings rates, Spring 2021 is shaping up to be the biggest “spring bounce” ever, says Jonathan Smoke, chief economist for Cox Automotive, Manheim’s parent company. Smoke said it’s hard to predict, but he expects used-car prices to at least somewhat follow the usual seasonal pattern and come back down a bit later this year. But he also expects high demand, low supplies and high prices to persist throughout 2021. “We do not see any signs of the extreme demand-favored imbalance changing, at least before this summer,” he said in a press conference in early April. “Tight supply is getting even tighter, and demand is about as stimulated as you could imagine was possible.” Many sources of used car inventory dried up in 2020, particularly rental car fleets. After air travel slowed to a crawl, many companies offloaded cars en masse last year and curtailed purchases, which means there are far fewer exiting rental fleets in 2021. Alex Kwanten So how did used-car prices get so high? Just about every major source dealers and wholesale auctions turn to for sourcing used-vehicle inventory dried up in 2020:
- The trade-ins that dealers take towards the purchase of new vehicles, because new-vehicle sales fell 14.5% in 2020
- Former rental cars, because air travel was sharply curtailed last year due to Covid-19, rental car companies slimmed down and far fewer ex-rentals are entering the used-car market in 2021
- Off-lease vehicles that customers turn in at the end of a lease, because many customers extended their leases during quarantining rather than visit a dealership, and because more lease customers are buying their vehicles at lease end, instead of turning them in.
- Repossessions are down, too, partly because government support in terms of unemployment benefits and stimulus packages has helped people make their payments, and because many lenders made it easy for borrowers to extend loans and postpone payments, rather than repossess their cars.
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