First, automakers overextended themselves in 2014 with subsidized leases. All those cars are coming off lease now and are back on the dealer lots. The supply is extreme and they’re overstocked to the max.
Second, buyer tastes have changed over the last three years. Back in 2014, the marketplace was much more heavily tilted toward passenger cars than it is today. Nowadays, most people want to drive some kind of light truck — an SUV, a truck, a van or a crossover.
So passenger cars are sitting unloved on dealer lots now.
And in fact, used cars are depreciating at such a fast pace that there’s almost never been a better time to buy a used vehicle.
New data shows that the average used car lost 17 percent of its value year-over-year during the last 12 months. That’s according to research from auto analytics firm Black Book.
The average value of a used car is now $15,300, which is down from $18,400 just a year ago. That kind of steep decline in value is nearly double the rate we had just three years ago in 2014!
That means the best deals right now are on three-year-old passenger cars. In particular, three-year-old luxury cars are a steal of deal. Luxury cars have always been more heavily tilted to the sedan category than they have to the light truck category.
But the ultimate deal of all? A three-year-old hybrid or a three-year-old Nissan Leaf. Leafs are selling for practically nothing right now.
That’s because Nissan very heavily leased the Leaf and they’ve fallen out of favor because of low gas prices. According to Clark, people are now buying Leafs that have 25,000 to 30,000 miles on them for as little as $6,000. It costs next to nothing to run a Leaf, so consider if this could work for your commute cycle.
What you need to know if you’re going to buy used
With used car purchases, you buy “as is” — no matter what condition the car is in. The vehicle and all its warts become your problem. If it comes with any warranty, it’s usually very limited. Yet if you know how to buy safely, you can really get a deal!
A few key steps to take when buying a used car
As with any purchase, you have to do your homework when you’re buying used.
Arrange your used auto financing first. Look at credit unions, online banks or even traditional banks. Only take dealer financing if it beats any other offer you have. Of course, I would love for you to pay for an affordable used car completely in cash.
Make sure the used vehicle is worth what you're paying. Check Edmunds.com, KBB.com or NADA.com for the true market value so you come up with a feel for the price. You can also use CarGurus.com, which lets you put in your zip code and the make/model of the vehicle you're interested in at their website. They'll comb through some 2 million listings available on published databases and rate the vehicles available for sale with notations of "great price," "good price," "fair price" and on down.
Check the vehicle number. Run the VIN though CarFax.com to find out if it's a flood vehicle or if it's been in a horrible accident.
Check a car's repair record before buying. Buying a used car involves more risk than buying a new car because you never know how the previous owner treated that vehicle. One way to minimize that risk is to buy used car models that have proven to be reliable.
Flood vehicles are the biggest threat in this category. To the naked eye, there’s no telling that anything is amiss with these cars. But you’ll know you’ve got a flood car when you encounter failed electrical systems throughout the vehicle.
You also want to be sure you’re not buying a car that’s been in an accident and gotten welded back together. CARFAX, Autocheck and the National Insurance Crime Bureau (NICB) are a few websites you can use to look at the history of the car. They typically report any accidents where an insurance claim has been made, in addition to the registrations by state and the type of title the car has.
Flood vehicles are the biggest threat in this category. To the naked eye, there’s no telling that anything is amiss with these cars. But you’ll know you’ve got a flood car when you encounter failed electrical systems throughout the vehicle.
You also want to be sure you’re not buying a car that’s been in an accident and gotten welded back together. CARFAX, Autocheck and the National Insurance Crime Bureau (NICB) are a few websites you can use to look at the history of the car. They typically report any accidents where an insurance claim has been made, in addition to the registrations by state and the type of title the car has.
Vet out problem cars online. Flood vehicles are the biggest threat in this category. To the naked eye, there's no telling that anything is amiss with these cars. But you'll know you've got a flood car when you encounter failed electrical systems throughout the vehicle.
You also want to be sure you’re not buying a car that’s been in an accident and gotten welded back together. CARFAX, Autocheck and the National Insurance Crime Bureau (NICB) are a few websites you can use to look at the history of the car. They typically report any accidents where an insurance claim has been made, in addition to the registrations by state and the type of title the car has.
Have the used vehicle inspected by an independent mechanic. One of the key things to know about buying a used car is that you buy "as is." CarFax alone is not enough of a check; you need to take this additional step. Never rely on any representations that the salesperson makes about the car, be it a commissioned employee at a dealership or an independent seller in your neighborhood.
Check out your no-haggle buying options. It can be tough to find a diamond in the rough and weed out the lousy deals. Try Carvana.com, which has a 7-day no questions asked return policy. It's kind of like the Carmax of the online used car buying world.
Beware of the impact of fuel efficiency mandates on reliability. J.D. Power's new 2014 Long-Term Dependability Study takes a look at how many popular car models hold up after 3 years of ownership. Going back to 2011 vehicles, a strange trend emerges: It's the first time in a long time they're less reliable than the year before. Much of the unreliability is because of the new transmissions in the quest to meet federal mandates about fuel efficiency. Quality is too often being sacrificed in the name of fuel economy. With that said, here are the most/least reliable 3-year old used cars.
Never trade in a car you still owe money on. In the worst-case scenario, you could come to find out that the dealership never pays off your loan when you trade your car in … and you don't have the vehicle anymore. Yet you'll still be responsible for payments on the car that you no longer own. Your credit will be dinged because of the missed payments and your new car may even be repossessed if you can't meet both loans!
Visit ClarkHoward.com for more info, or get his best-selling books signed with free shipping at GetClarkSmart.com.
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