Even the Very Cheapest Used Cars Are Overpriced These Days
The used car crunch has made its way to the bottom of the market.
Two universal truths in the world right now: You’re going to overpay if you want to buy a house, and you’ll probably have to overpay for a car, too. Unless you’ve been living on the planet Mercury you’ve likely seen the crap-ass used car values lately. It goes beyond anecdotal observations, too — CarGurus says that the average used car transaction price has risen more than 25 percent on some brands in a mere six months. It’s not just collector cars or greedy dealer price gouging, either. Manheim Auto Auctions reported a huge surge in wholesale car prices across price ranges, creating a ripple effect of higher retail pricing, which has now trickled all the way down to bottom-dollar used car sales.
That’s not really news to most anyone who’s been car shopping lately… but the stories I’ve seen about the used car crisis tend to focus on certified pre-owned and high-end collectibles. In my brain, those are rich people’s problems. But that’s not really the case anymore. That 25 percent increase in price on moderately priced normal cars has consequentially decimated the bottom of the market, which I’ll define as cars under say, $6,000. Not even a year ago, six grand got you a lot of car — remember, I sold my 2015 Fiat 500L for $5200. Now, a search results page at that price point is a ghost town.
A good friend of mine, Sean, has been rolling around in his rebuilt-title Scion xB with about a quarter of a million miles. Sure, it’s trusty, but it’s a fifteen-year-old subcompact Toyota that was a total loss at some point in its life. He needs a solid vehicle for work since his job has been routinely taking him out of state.
Frustrated, his wife Morgan came to me for help on finding a decently low-mileage car (we’re calling that under 120,000) for somewhere in the $4,000-6,000 range. I mean, I’m the neighborhood car buying guru, I found a Fiat 500 Abarth for $1,500 only a few weeks prior. Finding a dependable, fuel-efficient, well-maintained car with a $6,000 should have been cake.
Weeks since we started talking, I haven’t found anything. I’ve spent days and hours perusing all of the apps, Craigslist, Facebook Marketplace, CarGurus… no good results. Six months ago $4,500 would have bought a decent condition, 2010 or newer, compact car from any number of brands. Now, that “$4,500 car” looks like it’s listed at more like $7,000. Everything else has starship mileage, or has a rebuilt title, with hastily executed bodywork by a low-effort flipper looking to make a quick buck.
Case in point: whilst perusing Craigslist, Morgan sent me a listing for a 72,000-mile Toyota Yaris hatchback. The price was somewhat low: $4,500. I didn’t understand, I sold a 2008 Yaris with about the same mileage, three years ago, for $4,000, with a clean title. Their example had a rebuilt title, with its whole front fascia ill-fitting and poorly paint matched. It was a base model, so it didn’t have ABS, cruise control, or power windows and locks — essential for a guy who had planned to travel out of state regularly. The car’s air conditioning didn’t work, and the owner was disinterested in fixing it. Not particularly enticing.
The next vehicle she sent me wasn’t much better: a 2015 Mitsubishi Mirage with a lot of miles and a rebuilt title. She sent me a few Kias and Hyundais in varying conditions, most of them rebuilt title, or with more than 170,000 miles on their odometer. It seems like the lower-mile examples of practically any compact car are still commanding close to $10,000; for vehicles with more than 80,000 miles.
According to CarGurus’ analysis, the whole used car market’s pricing is up 30 percent on average. On an $18,000 car, that 30 percent price increase is definitely not insignificant, but it’s not the same as a shopper only looking to spend $4,000. For the mid eighteen-grand and up shopper, a 30 percent price increase could have you reevaluating your car decision, if you’d want to instead buy a new vehicle, or possibly accept a higher-mile or less optioned used one.
But for the budget shopper, that price increase is devastating. Cash-strapped people have fewer options than ever to find reliable, cheap transportation. In the bottom end of the market, that $1,500 difference between $4,500 and $6,000 could mean weeks or months of income that they don’t have. It could be the difference between a nice, well-kept compact car, or a rebuilt title, junky and possibly unsafe used car that is more likely to fall apart not long after assuming ownership, defeating the whole purpose of spending what is a substantial amount of coin to get a newer car. Sigh.
Or, folks who can’t find a cheap car but still need to get around could be forced into buying something they can’t really afford but might be able to swing monthly payments on — only to get stuck with some terrible and lengthy loan terms.
I’ve been watching the classifieds like a hawk, eager to find a deal to pass along to Morgan and Sean. Morgan’s stretched her budget a bit to nearly $7,000, which she would rather not spend. For the moment they’ve been making their old Scion xB work, waiting for that unbeatable deal that will bring them into motoring modernity.
So the big question now becomes, how long is this “new normal” here to stay? Will cheap cars come back once the new car shortages we keep hearing about are resolved? Or are the days of finding a half-decent used car for $4,000 or less truly behind us? It’s scary to think about, but it’s not beyond the realm of possibility.
Wish them, and me, luck.