The State of The Used Car Industry and The Broader Economy

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2 min read

We couldn't help but notice car lots packed to the brim with all makes and models, but not a single buyer in sight. When dealerships experience this, it can be a barometer for the used car market. We had a hunch about how bad it was, but after talking with a sales associate, it was worse than we thought. Sales were in the gutter, prices were through the roof, and the chance of customers getting approved for a loan was slim to none. We decided to dig in and see what is causing this trend.

Pricey hurdles

One of the most striking aspects was the sticker shock. For instance, a 2021 Toyota RAV4 was listed at $44,000, more expensive than a brand-new model. It's a no-brainer that high interest rates and inflation are taking a toll on people's ability to afford cars. So, instead of lowering the price, dealerships are asking higher prices to flip some sort of profit.

Spending ego

This dealership also stressed how touchy business can be when selling big-ticket items. In today's flappy financial climate, folks are clutching their pearls, leading to decreased spending on high-value purchases. Low consumer confidence is a clear sign that the economy might be facing headwinds.

Stingy lending

Another sticky situation is lending getting tighter. Most car sales depend on loans, but the fewer customers qualify, the riskier it is. Especially if conditions worsen and more borrowers default, loans will be even trickier to get, which means even fewer cars a dealership can sell.

Repos on the rise

Borrowers are struggling to make payments, leading to more and more cars being repossessed across the country. This is a gut punch to the lending system, creating a bubble in the market and putting dealerships at risk of bursting and, by extension, the economy.

Drop it like it's hot

The short of it is that dealerships have too much inventory and don't want to drop their prices, or it would be a whopping loss. But this also means bigger wins for private sellers. If you have a used car you want to get rid of and would rather not hassle with a dealership or sell it on your own, then let us give you an offer worth your time.