Who is paying the most for used cars

It's no secret that used-car prices have skyrocketed over the last two years amid an industry turned upside down by supply-chain issues and reduced new-car inventory.

But how much extra are consumers paying? An average of $10,046 more — 43% — than if typical depreciation expectations were in play, according to a June 30 snapshot of prices in the "Return to Normal" index released by CoPilot, a car shopping app.

related investing news

Fed is 'way too tight' and will have to consider cutting rates in 2023, says Wharton's Jeremy Siegel

Jesse Pound

6 hours ago

The average price tag for a used vehicle is $33,341, a 0.5% increase from May and just $172 below the peak in March, the CoPilot research shows. If depreciation forecasts had held true, the average price would be $23,295, according to CoPilot's index.

More from Personal Finance:
6 strategies to recession-proof your finances at any age
Before you 'chase dividends,' here's what to know
Focus on your ‘personal economy,’ not a possible recession

"Despite signs of a slowing economy, rising interest rates and high fuel prices, the used-car market is holding firm," said CoPilot CEO and founder Pat Ryan.

Consumer buying remains strong at least partly due to spillover demand from the new-car market. Supply-chain issues — primarily an ongoing shortage of computer chips — have left dealer lots with fewer new vehicles to sell.

It's a 'long road back to normal'

The amount that consumers are paying above normal also depends on the age of the car. Nearly new vehicles (1 to 3 years old) have an average listing price of $42,314, which is $13,145 more (45%) than the projected normal amount of $29,169, according to the CoPilot index.

By contrast, vehicles that are 8 to 13 years old come with an average price of $18,038, or $5,416 more (43%)  than the previously forecast $12,622. That category is the only age segment whose average price has been trending downward for several months.

"While there are some segments showing initial signs of softening, the used car market overall still has a long road back to normal," Ryan said. "Despite a number of challenges facing the overall economy, the market has not softened to the degree that might have been expected."

How to get the best price on a new or used vehicle

For buyers, having a trade-in is their best bet for getting the price of a car — new or used — down. The average trade-in equity is an estimated $10,381, a 49.2% increase from a year ago and the first time above $10,000, according to a joint forecast from J.D. Power and LMC Automotive.

Nevertheless, be prepared for sizable monthly payments: They average $678 over 70.3 months (a couple months shy of six years) for new cars, and $555 over 70.8 months for used vehicles, according to most recent data from Edmunds.com. Interest rates also have ticked up and now average 5% for new-car loans and 8.2% if you're borrowing to buy a used vehicle.

VIDEO4:2204:22

We're in an unprecedented time in the auto industry with rising demand heading into a recession, says former Ford CEO

The pandemic has caused a lot of self-examination over the past several months, and that is certainly true about owners' relationships with their cars. 

Vehicles that were used multiple times every day in pre-COVID times are now sitting in garages for days if not weeks at a time. This, along with an economy stifled by business shutdowns and restrictions, has prompted many people to sell their current vehicle and/or downsize their family vehicle fleet. Some consumers are also trading a larger or luxury vehicle for a smaller non-luxury vehicle that is less expensive to own and operate. 

On the other hand, the desire by many to avoid the use of public transportation has spurred former bus, train, and subway riders to purchase a car. The prospect of sharing a ride in close proximity with dozens of other passengers just doesn't seem palatable right now. 

What this means is lots of people are buying and selling used cars. This is attested to by statistics on used car sales at auction gathered by J.D. Power. Among the findings: used car prices have grown 35% over the past 16 weeks and are now 15% higher than at the beginning of March.

All this might prompt you to consider selling your car. Of course, if you're going to do that, you have many options. Some are obvious, like trading the car in or selling it to a neighbor or friend, and some are less obvious, like selling it to a national used car retailer or getting a guaranteed price from a local dealer. This article is intended to give you good advice on selling your car for the most value.

How Much is My Car Worth?

The first step in getting the most value when you sell your car is understanding its approximate worth. The vehicle's model year, brand, model, mileage, and overall condition are key factors in determining what it is worth. 

If you plan to trade your car in as you purchase a new vehicle you can expect to receive the appropriate trade-in value. Similarly, if you sell your car to a dealer you can expect to receive something close to the trade-in value. These are essentially wholesale prices that provide a margin of profit to the dealer when they retail the used car. 

If you plan to sell your car to a private party you can expect to get a price like the "clean retail" value, since you are selling to the end-user. 

What is the Best Way to Sell a Car?

With a firm understanding of your car's basic value (or should we say "values" based on the method of sale) you should make a decision about how you will sell it. Part of the decision depends on how much time you want to devote to selling your car. Do you want to make this your life's work, or do you just want to sell your car quickly for a fair price without much hassle? 

Yes, you might be in line to get the most money for your car if you sell it to a private party, but you have to consider the value of the time you will spend getting the car ready for sale, creating the ads for the car, and, importantly, showing the car to strangers. You also have to consider the awkwardness and difficulty in taking payment from a private party to make certain you are getting the money you deserve and not a worthless check.

An obvious alternative is to trade in your car on another car, but if you are selling your car without replacing it, that is not an option. You can, however, sell your car to a dealer simply by going to dealers in your area and asking them what they will pay for your car. Or you can take it to a location of a national used car retailer, like CarMax for example, and ask the same thing. The easiest solution is available right here on the J.D. Power website through our Sell My Car solution. 

All you need to do is enter the vehicle identification number or the license plate number of the vehicle you want to sell, answer a few simple questions about it, and you will be presented with a real offer from a local dealer with a price for which it will purchase the car. With that in hand, you go to the dealership, where the dealer will see that it is as you represented it, and your car is sold.

How to Sell A Car

No matter how and where you sell your car, there are a few tips you can follow to maximize your return. First, make certain your car looks good. Wash it, wax it and do all you can to give it great "curb appeal." You want the prospective buyer — be it an individual or a dealer — to want that car. Looks matter.

Fix It or Disclose It

If your car has obvious mechanical problems, you need to address those either by getting them fixed or simply pointing them out to the prospective buyer. While a private party might want a car that has no problems at all — don't we all? — dealers will typically expect the car to have some mechanical issues. The fact is, they have the ability to repair those faults much less expensively than you do, and they expect to do some vehicle prep before they retail the car on their lot. So, if you are going to sell your car to a dealer it is much less important that the vehicle be in near-perfect condition.

Demonstrate your Care for your Car

Potential buyers want to be reassured that they aren't about to purchase a vehicle that will turn out to be lemon. One way you can offer that reassurance is by showing the vehicle's maintenance records. If you have maintained your car meticulously and, importantly, have kept those records, show them to prospective buyers. Many people will be impressed by your proper treatment of your vehicle.

Play the Field

If you intend to sell your vehicle to a dealer, it isn't wise to take the first offer you are given unless it is right on the money based on what you believe your car is worth. Many times, if you get an offer from a dealer, including an offer from the J.D. Power Sell Your Car service, it will be good for a period of time. You can use that time to "shop" your car to other dealers and even private parties to see if someone will beat that price.

Make the Advertisement Look and Sound Great

These days there are plenty of places to advertise vehicles for sale online, and many of them are free or low-cost. When you advertise your car, you want to put its best tire forward in the form of excellent photos and a good description. Take some time to park your car with a neutral background and in shade or soft light (as at dusk) that shows your car to the best advantage in your photos. Similarly, write a description of the car telling the prospective buyer about its best features.

Qualify Prospects and Keep Safe

Personal meetings can be problematic. If you are going to meet someone to give them a look at your vehicle, do it in the safest manner possible, meeting during the day at a public place that is frequented by other people. Feel free to ask the prospective buyer how they plan to pay for the car to make certain that they are serious. If you have any questions about them, don't meet with them. There are other buyers out there.

Assure Yourself of Proper Payment

If you decide to sell your vehicle to an individual, accept only cash or a cashier's check in payment. You are wise to close the transaction at the bank that issued the cashier's check. Never accept a personal check under any circumstances. Once you have made certain that the cashier's check is good, you can sign over the title of the car to the buyer and let them take possession of the car. 

More Options than Ever for Selling Your Car

These days there are more ways than ever to sell your car, many of which make it much easier and safer for you. At the same time, it seems there are more ways than ever that something can go wrong, particularly with a private sale in the midst of a health crisis. 

Remember, your safety is the paramount consideration. With that in mind, you can sell your car happily and get the money you deserve.

How can I get the most money for my car?

Is Carvana better than CarMax?

Where are used car prices the highest?

Who makes the most money at a car dealership?