First, just why is the market so out of control for used cars right now?
It is the same story that we have heard with just about every consumer product during this pandemic. Supply chain issues are causing a havoc in the auto industry and new cars just can not be manufactured quickly enough. This has caused a trickle down chain of events causing used cars to be in short demand.
Consumers are holding on to their vehicles because of the lack of new cars or trucks and the high prices being charged by dealers. Rental companies, who usually flood the market with used vehicles, are holding on to their cars longer because they can not get replacements. These rental companies are even purchasing used vehicles from auctions, further cutting the supply.
The result of all this is used vehicles selling for huge prices. That means that if you can even find a car on a dealer lot, you will need more money to pay for it than it originally cost. This is a bad deal if you are looking for a new car, but it is a potential boom for sellers. So, is it time to sell? Let’s find out.
Yes, You Should Sell
First, let’s look at some situations where you should sell and probably sell right away, before the market turns.
You are ready to downsize.
Are you paying for more vehicle than you need or can afford? If so, selling now might get you out of that hole. Yes, you will have to pay more for a replacement, but if you are selling a high end vehicle to get into a lower one, you will likely come out ahead when all is said and done.
For example, take a vehicle that used to sell for 20,000 dollars a few years ago. Now it may be worth 30 percent more and can be sold for 26,000 dollars. Sell that vehicle and downsize into a 10,000 dollar vehicle which now sells for 13,000 dollars. While you may be paying 3000 dollars more than you otherwise would have, you are selling your old vehicle for 6000 dollars more than it used to be worth, which puts you on top in this transaction.
You have an extra vehicle.
Do you have an extra car collecting rust in your driveway? There will never be a better time to sell it than now. Even if you are holding a vehicle for a child with an upcoming 16th birthday, it does not pay to hold it. Sell it now and then buy a vehicle once the used market comes back down, which it eventually will. If you wait too long, new car manufacturing will catch up and the chain effect will send used prices into the basement again.
You want to be a one car home.
These days, with the switch to at home work, many families no longer need to have two cars in order to function. If you are in this situation, the current value of your car should encourage you to take action. Make several extra thousands of dollars by taking advantage of the current lack of used inventory and take advantage of the lower costs that come with just owning one car.
No, You Should Hold It
But are there situations where you should not sell? Absolutely. Here are a few examples.
You want to upgrade.
The current state of the market is an excellent opportunity to trade in a vehicle, but not if you want to upgrade. While you might come out on top with the trade in, you will lose out in a major way on the new vehicle side of the transaction.
With the current lack of new vehicle inventory, dealers have no need to negotiate. They can and will charge you full price while also tacking on high priced dealer add-ons. So, while you might make a few thousand extra on your trade, you will likely pay many times that in extra new car costs.
You bought it recently.
If you purchased a vehicle recently, within the last year, you probably already payed a higher than normal purchase price. Even with the lack of used inventory, you are unlikely to come out ahead and the best you might hope for is to break even. While it might be nice to drive a car for a year and then sell it for the same price you bought it, there is a problem. Your new vehicle price will be much higher, giving you an overall loss on the transaction. If you bought a vehicle during the pandemic, this means you are probably stuck with it, unless you are willing to take a loss.
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