The used car market continues to be a tricky one. It’s tough to know what to do when you go to a used car dealership because things keep changing. First, there were no used cars, so prices went sky high, then prices came down as inventories rose, but now we are dealing with unprecedented interest rates.
Dealerships, whether it is a traditional brick-and-mortar store or an online one, such as Carvana, are in a tricky spot.
What Happened with Carvana?
In July of 2023, Carvana announced a restructuring to lower cash interest expense and offered over 35 million in shares to raise its cash by over $350 million. The agreement with their bondholders to reduce debt shot its stock up over 700%.
But now Carvana, like other used car dealerships, is facing rising interest rates. The high-interest rates are a catalyst for several other problems in the used car market, including reduced supplies.
What Does the Used Car Supply Look Like?
After all-time lows in 2021, the used car market saw an increase in inventory as buyers were finally able to get the new cars they were waiting for. Now with the high interest rates, shoppers are again putting off buying new cars and holding on to what they’ve got. The result is fewer used cars available for sale.
If you’re looking for an older, less expensive car, it’s even harder to find now. Shoppers with a budget of less than $15,000 will face some of the lowest inventories in the market. The reason for this is that not only are Americans holding on to their cars for longer than ever, but auto manufacturers have also been producing few cars since 2008, leaving fewer available to make it to the used car market.
Successfully Navigating the Used Car Market
The good news is that you can still go to your used car dealership and find something that works for you. It may take a little longer, but it’s very doable. The key is to act quickly when you find something you want. Get pre-approved for a used car auto loan so you can go in ready to buy. This is also a good time to make sure your credit is in good shape. Make any changes needed to raise your score because the most competitive rates right now are reserved for people with top credit scores.
As you shop for your next used car, don’t limit yourself to dealerships right in your area. Companies such as Carvana make it easier than ever to cast a wide net and get a larger selection to choose from.
Have You Considered a Used EV?
Now might be a good time to switch to an electric vehicle. Used EV prices have dropped by up to 26 percent, so if you’ve been thinking about a Tesla, you can find some of the best prices on used models.
The rising interest rates might be putting a damper on used car buying, but you can still find good prices and, with good credit, get good terms when you go to a used car dealership.
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