Factors That Can Impact the Value of Your Vehicle
Everyone is aware that the car market, both on the new and used side, have flipped upside down since the start of the pandemic. Unlike any time in history, new cars have appreciated the moment they drive off the lot. Even though prices for used cars are all higher than normal, there are certain types of vehicles that are doing better than others in today's market. The rise in gas prices is causing a high demand for EVs, and a very low demand for V8s and diesels. So, is now a good time to sell?
How Covid-19 and the Chip Shortage Has Affected The Value of Your Car
The historical average depreciation of your car was 23% in the first year of ownership, and then an average of 15% each year after that.
If you buy your car at MSRP today, you may have between 1-2 years of profitability in your car. This could change rapidly as new car manufacturers slowly ramp up production. This new curve is why some companies, like Tesla, announced in any leased Tesla delivered after April 15th is not eligible to be bought out at the end of its term. They do not want their customers making money off a leased vehicle. Tesla's alone have risen in price by over 5% across all models since the start of 2022, according to Electrek.
So, Is It Time To Sell?
If you need to sell your old car because you already have a new car, or have no need for for a car anymore, then now is absolutely the best time to sell. The market that has been inflated by the pandemic is slowly losing air on a week-to-week, sometimes even a day-to-day basis. The trends we have seen in the past few months is a 1-2% decline in the market every week. If you are looking to upgrade your old car, then the answer is a little more complicated.
According to Edmunds, between April 2019 and April 2020, nearly 44% of new vehicle sales had a trade-in with negative equity. This number may have decreased in the last two years, but the trends are showing that within the next or two year there will be over 50% of cars with negative equity. The depreciation rate for new cars is going to be higher than the historical 15% per year. Another factor to consider are increasing interest rates. We have seen the average car loan payment go up from $650 in May 2022 to a new record $712 in June 2022, according to Cox Automotive. These factors could cause you to overpay for your new car and be significantly underwater when it comes time to sell in a couple of years. We, at My Car Auction, are already seeing more sellers coming to us that owe more money to their lenders than what the car is worth.
The lesson? If you don't absolutely need a car, now is not the time to sell your old car to upgrade to a new one. Wait until the market stabilizes to make that new car purchase. For any other tips regarding when and how to sell your car, see our FAQ page, or use our chat in the bottom right to communicate directly with one of our buying experts!