April 2, 2021
It used to be in 2010 that you could buy a used car from online, the paper, or even used dealer lots. There were thousands upon thousands of cars available at a wide variety of prices, but in general, you were paying only a percentage of what that same vehicle cost the owner new. As well, there were clearout events, “get rid of stock to make room for new vehicles” sales, and the like from used car dealers and major brand lots.
However, over the past decade, used car prices have steadily risen, to the point that buying a 5 year old used car or truck today can cost more than half of the original selling price of the vehicle when new. This is especially true with vehicles that have been fully paid off with 5 year financing, where there is no lien on the vehicle, and the owner is simply selling it to move on to another vehicle.
But what is driving this marked increase? What is the actual cost of buying used today, compared to previous points in history?
It might surprise the common man to know that the used car market is inexorably tangled, meshed, and part of the new car market. It’s convoluted to go through all the intricacies of how they depend on each other, but it can be boiled down to the simple capitalistic ideal of supply and demand.
Since the year 2000, more and more people have been obtaining their licenses, buying used or new cars, and adding their vehicle to the large amount already on the road in the US today. Yet, these cars don’t magically appear out of thin air. There is always a car that was new at some point, being sold on as used, to fuel the unending cycle.
Take, for example, that in 2019, 17 million new cars, trucks, and other roadworthy vehicles were sold. Compared to the 2019 population of the USA, about 328.2 million people, that’s about 5.1% of the population buying new vehicles. Next, take that same population figure, but compare it to 40 million used cars sold. Now we’re at 12.2% of the population. Combined, it’s 17.3%, or just under one fifth, of the population of America buying vehicles. That number, simply, is astronomical.
We are targeted by multiple companies for multiple products, to buy their superior brand product and feel good about it. This targeted consumerism is most certainly laid bare in car and truck sales, it’s just that we generally don’t see it in front of us.
A very common thing in new car purchases are the oft-wondrous “Dealer Incentives.” Come in during this month and if you qualify on your credit, we’ll take $3,000 off the purchase price immediately! Or, buy this car on a 54 month financing plan with $2,000 down and we’ll throw in all your oil changes for free!
What is often not seen behind these dealer incentives are the sneaky bits. That new vehicle during their big sale days? One or two will be sold at or near MSRP, but often you’ll find out that the vehicles, especially in demand ones, are marked up several thousand dollars. A dealership is a business, and they have to sell their product above cost to make a profit. So that sweet $3,000 off deal suddenly only brings the car back down to MSRP, or those oil changes, which if you did two a year at $50 per oil change, account for maybe a quarter of that extra markup, now seem a bit sneaky.
These little traps will ensure that the new car does get sold, and the altruism of 10% of the value drops off the car the moment it leaves the dealer’s lot is often quite true. Only with incredibly rare exceptions will vehicles ever gain value over time, so ultimately, we, the car hungry consumers, are almost always putting money into a vehicle that will depreciate like a stone dropped off a cliff.
As pointed out in the header of this section, in 2019 alone, 40 million used cars were sold, 17 million new ones were sold, and almost one-fifth of the entire population of the USA bought them. The reason that number is astronomical is that if you look even ten years ago, in 2010, the combined total of new and used cars sold was 38.8 million. 2019? 57 million.
The biggest reason behind this is that the population of the US has been exploding for quite a while. If you live in a big city, you might have come across advertisements for newer and newer suburbs, or seen a small apartment building taken down to be replaced with a sky scraping condo tower. This is often because more and more people are moving to North America, and the USA in specific, because of the promise of a better life than where they may be coming from.
As well, the USA has a positive population growth percentage of over 11%, meaning we’re expanding from within with more births per thousand than many other countries. For those born in 2004, this means that in 2020 and 2021, they’re at the age for a CDL or learners license, and often a used car is purchased by the family to let that new driver learn with.
Or, the new driver could have been working part time for a while, saving everything they could, and pitched in 50 to 100% of that used car. The “first car” is an important time for a new driver, as it’s then that they start to become aware of what needs to be maintained, what needs to be changed on a schedule, and the like.
And with more and more teens entering into the throngs of licensed drivers every year, there is a constant need for supply, meaning the demand sees the price of used cars rise due to the amount of people scrambling for them.
It happened in 2008, with the economic bubble popping and everything falling into the big pit of a downturn. It happened just last year,in 2020, when the global pandemic halted worldwide production of vehicles for nearly half the year. Whether they be acts of God or foolish humans, these situations are very often beyond the control of the general consumer.
In 2008, the downturn caused many new vehicle plans to be scrapped, for factories and companies to lay off thousands of workers, and even close some assembly lines for good. While the government bailouts helped, often these companies were either propped up by international investors, or reorganized under Chapter 11 bankruptcy, closing “non-critical” departments and shelving a lot of planned vehicles.
This is why, in 2008, there was a sudden surge of interest in used cars. The general consumer either did not have the capital for a new car, or needed a car for their daily life but needed it on the cheap. This eventually died down as the downturn evened out, but the ripple effects of that sudden reliance on used vehicles is felt even to this day.
This precarious balance was torn apart by the global pandemic in 2020. Not only did some companies have to slow down their assembly lines and temporarily lay off some workers, they also had to shut down production entirely for a few months until acceptable conditions for resumption of work could be met. This meant that there were few to no more new cars to sell from dealerships for months on end.
During this time, the used car market exploded. Used dealers were getting so many calls per day, so many on-lot visitors, that many often had to bring in temporary workers just to handle the phones. AutoTrader, Craigslist, BringATrailer, among many others, were suddenly inundated with used cars, sometimes at exorbitant prices, as people looked to offload financial burdens, lessen their insurance by getting rid of one of three or four vehicles in the family, or other reasons. And with a market ripe for vehicles, these cars sold.
For the next decade, it is expected that this cycle of some buying new, many buying used will continue. Vehicles are often required for the American worker to function, either by being their primary form of work, commuting in them to said work, or driving them part of the way before using some form of public transit.
As well, as the complexity of vehicles continues to deepen, with electric vehicles also taking up more and more of the market, there may come a break-point where the market might topple again. This is shown by many of the Tesla models from the earlier years of 2009 through 2014 being sold quite inexpensively on used markets, but the new owner needing to spend hundreds, if not thousands, on new battery packs, refurbishing and rebuilding the motors, or other complexities of electric vehicles that are still new and unknown.
Sure, we’re plugging ourselves, but this is where we really stand out! Autodigg’s entire business is on creating a win/win transaction for car buyers and car dealers.
In an environment where used cars are retaining their value, our speciality is saving car buyers money and car dealers time, improving the transaction for everyone involved.
The way that we do it is by empowering car buyers to browse our extensive inventory of used cars, which is sourced from reputable local dealers all over Austin. When you find a car that you like, you invite dealers to bid for your business.
Dealers that list with Autodigg also offer an Autodigg rebate, which ranges from model to model but averages $250 per car. That means that the low price you see on Autodigg will drop another $250 once you purchase the vehicle!
Autodigg removes the haggle, the hassle, and the headache from car buying and makes it easier for dealers by lining them up with customers looking for their inventory. Everybody saves time, and everybody wins!
If you’re shopping, start now:
Once you’ve come to an agreement with a dealer, the transaction takes place via the dealer’s office. You don’t need to go in, meet with, or call anyone until you’re ready to complete the transaction - that’s how car buying should be!
Autodigg is a privacy-centric platform that enables Car Buyers to buy Cars 100% online from local Car Dealers while staying Anonymous, including financing and insurance quotes from leading vendors.
© AutoDigg 2023. All Rights Reserved.