In April, Bloomberg reported that a used car price collapse was imminent as a result of factory shutdowns and decreased new-vehicle demand. Additionally, as rental car companies like Hertz, Avis and Enterprise were looking to sell-off their fleets after being hit by hard financial times, an influx of used cars on the market could drive prices down even further.
Did Bloomberg’s predictions come to fruition? And even if prices are low, is it safe to buy a used car in the middle of the pandemic? GOBankingRates spoke to car experts to find out.
Since May, Used Car Prices Have Been on the Rise
Bloomberg’s predictions did prove to be right — but you likely missed the boat on the best used car prices. If you snagged a used car back in April or May, you could have gotten a good deal. But prices have gone up since then, said Joe Akers, director of operations at Cowles Nissan in Woodbridge, Virginia.
“At the beginning of COVID (and even now), auto auctions closed, which typically are huge used car sellers, and their pause in operations created a massive surplus of inventory,” he said. “Pairing that excess inventory with the nation full of economic uncertainty, used car prices dropped dramatically in April. They reached the bottom towards the end of May. In the past 30 days, however, used car prices have risen substantially as demand has increased and new vehicle supply has dwindled.”
Prices Could Even Be More Inflated Than Normal
A lack of new car inventory means that car dealerships will be more reliant on used cars for profits, said Paul Maloney, owner of Car Leasing Concierge.
“On average, used car dealers mark up their vehicles with a $4,000 profit built-in, but now they’re getting greedy and taking full advantage of the situation, marking them up for a profit ranging anywhere from $6,000 to even $10,000,” he said.
Before agreeing to a price, do your research to make sure it’s a fair one.
“Buyers can research the car model by simply going onto Kelly Blue Book or Edmunds.com to see what the average price was before the pandemic hit,” Maloney said.
Even If the Price Seems Low, Dealerships Will Be Looking for Other Ways To Make a Profit on Your Sale
If you do your research and the price checks out, that doesn’t necessarily mean you will be getting a good deal.
“What I’m seeing is that there has been a drop in the advertising price of used cars,” said Bob Garrow, founder of Car Buyer Class, LLC. “I can tell you why we do that — it’s to get more people interested in contacting our dealership. In sales and finance management though, there are a dozen other ways that we can make money on selling a car besides just the price. If anything, even though you’re seeing a reduction in advertised prices, due to the drop in overall sales volume, dealer teams will be more aggressive in maximizing profits on the people who do actually contact the dealership.”
Dealers Aren’t Incentivized To Give Good Deals Right Now
Sean Pour, co-founder of the car-buying service SellMax, said that the used car market is hotter than usual — so it’s probably not the best time to buy if you’re looking to get a good deal.
“I personally know dealers who were selling 40 cars a month that sold over 78 cars this last month,” he said. “It seems like many people are using their stimulus checks to buy used vehicles. Seeing that the market is doing really well, I would say right now is not the best time to buy a used car. I actually believe the best deals are on new cars at the moment, as dealerships are looking to move this year’s models.”
Read: 30 Biggest Do’s and Don’ts When Buying a Car
Used Cars Are Selling for Above-Market Prices at Auction, Too
It’s not just dealerships where you’ll find inflated prices on used cars.
“Supply and demand are not in consumers’ favor,” said Lauren Fix, The Car Coach. “Even the auction lanes that are running virtually or in-person are selling cars above book value.”
Used Car Prices May Drop Again in a Few Weeks
Having a little patience while shopping for a used car might save you a few dollars in the long run.
“If you can afford to wait, I think that the used car supply might actually improve in the next few weeks or months,” said Richard Reina, product training director at CARiD.com. “This will stabilize prices, even if it doesn’t necessarily drive them downward.”
If You Do Want To Buy a Car — Used or New — Take Extra Precautions
“I’m a big advocate of being cautious during the pandemic,” Pour said. “In particular, I believe you should try and go on the test drive alone rather than have someone at the dealership go with you in the car.”
He also suggests doing as much of the car-buying process online as possible.
“Many dealerships are now putting videos and a lot of photos online so you can get a pretty good idea if you want to purchase a car right away,” Pour said. “Furthermore, sites like Carvana allow you to do all of the purchasing completely online.”
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If You Do Shop in Person, Have Peace of Mind Knowing That Many Dealers Are Making Additional Sanitary Measures
If you prefer shopping in-person, the experience should be a relatively safe one, Akers said.
“Dealers have done a good job of protecting consumers and staff from COVID exposure,” he said. “The cleaning protocols, at least from what I’ve seen around my network, are top-notch and lead me to feel safe shopping for a used vehicle during this pandemic. With less foot traffic than previous months and personnel being hyper-aware of the current situation, cleaning and sanitizing are achievable steps to stay on top of. Overall, it seems that most dealerships and auto groups are trying to ensure their customers can shop safely.”
Related: 25 Ways the Coronavirus Has Upended the Auto Industry Across the Globe
Take the Additional Steps Necessary When Buying a Used Car
Pandemic or not, you should be extra cautious when buying a used car. Make sure you know exactly what you are getting before signing on the dotted line.
“When shopping for any used car, the usual caveats apply, even if you are conducting much of your early research virtually,” Reina said. “Get as much history as possible — services like CarFax are helpful for finding these reports, perform a thorough test drive, ask if any reconditioning was performed and also ask about any warranty. In general, a Certified Pre-Owned vehicle is probably the best bet for a used car purchase.”
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This article originally appeared on GOBankingRates.com: Is It Smart To Buy a Used Car During the Pandemic? Here’s What Experts Say