Updated 11/9/2022: At CarEdge, empowering you is what drives us. Car buying, selling and ownership are too often accompanied by hassles and headaches. We do our best to save time & money with real advice from auto experts. Right now, the used car market is going through some big changes, and for the first time in 2022, buyers have more leverage. For four months in a row, used car prices have declined at the wholesale level. Retail prices are softening, and we’re seeing more CarEdge members negotiate better and better deals.
If you’re in the market to buy a used car your goal should be to get 5-10% off of the dealer’s advertised price. Still, some brands are more negotiable than others. In this guide we’ll walk you through what has changed in the market, why you have leverage, and how you can get that 10% off.
Let’s dive in!
Smart Dealers See the Trend; Use This As Leverage
As the end of 2022 approaches, there are more used cars on dealer lots than at any time this year. Data from Black Book reveals that days to turn, a metric used to measure how long cars sit on the lot before selling, is increasing. At the same time, there are more used cars for sale right now than at any other point of 2022. Supply is up.
Increasing dealer inventories, paired with higher interest rates, means that car dealers are paying more “floorplanning” cost than they have in years. Floorplanning is the interest payments car dealers make on their inventory. Just like you and me, car dealers typically finance the purchase of their inventory, which means that as inventory sits and interest rates rise, dealers have a financial incentive to negotiate and lower their prices to sell vehicles.
Dealers are once again working hard to sell cars. How do they do that? They lower their prices. Suddenly, with the softening of the market, more dealers are negotiating again, and many are starting to drop their used car prices rapidly. A quick look at CarEdge Car Search shows that more vehicles are seeing price drops. Take a look at this 2021 Chevrolet Equinox, for example. This dealer has discounted the price by 14% in ONE MONTH.
Over the past 35 days this dealer has dropped the advertised price by $3,500! That’s a 14% decrease in price in one month. Wow! As you can see, the most recent price declines are more significant. This is because the dealer is feeling the pressure of increased carrying costs, and a softening wholesale market (they can’t simply go to the auction and sell this car to make money like they could earlier in the year).
Use this information to your advantage! If you went to this dealership and requested an out the door price, be prepared to negotiate an additional 10% off of that amount. Why not? You already know the dealer is desperate to sell this car. Even if you end up with just 5% off, that’s still a win!
Get the most when you sell your car.
Compare and choose multiple offers in minutes:
The 5 Reasons Why Now Is A Better Time to Negotiate
When you go to negotiate a used car, know that these are the five reasons why they’ll be willing to negotiate with you. Feel free to even print this out and show them if they give you a hard time!
- Floorplan costs going up – We know that it is costing the dealer more money to hold onto their inventory than before.
- Demand is going down and cars are sitting on lots – Dealers who overpaid for used cars a few months ago are nervous because demand has softened. This, paired with increasing floorplan costs is a recipe for disaster for a car dealer.
- Dealers can’t sell their cars at the auction for a profit – Just a few months ago car dealers were selling used cars at dealer auctions for a profit. Now that option no longer exists. Wholesale prices have crashed, which means dealers are going to need to sell to retail customers, or take a HUGE hit at the auction.
- Retail prices are beginning to trend downward, albeit slightly – Car dealers had been holding out. Even while wholesale used car prices plummeted, car dealers were not lowering their advertised prices. Well, that trend has reversed, and we are finally starting to see a softening in retail asking prices.
- Dealers want to try and make a profit in the F&I office – Many car dealers are currently trying to sell used cars that they bought months ago for way too much money. Their best bet to breakeven on these deals is to take a loss on the front-end and to try and make it up on the back-end (finance and insurance). As long as you’re familiar with how to finance a car the right way, you should be able to get a better deal after all is said and done.
In fact, you can now finance with CarEdge to secure a low rate through our credit union partners. Not interested? You can still use your pre-approval as leverage to negotiate a lower APR at the dealership. Learn more about financing your car purchase with CarEdge!
Work With Smart Dealers
Some dealers just don’t look at the big picture and are oblivious to the car price trends we’re seeing right now. Not every car dealer understands that right now is the time to give up some of the profit they had planned to make on a vehicle in order to make a sale today before prices drop further in weeks to come. CarEdge Car Dealer Reviews and Markups.org are great places to learn what others have experienced at dealerships near you. Crowdsourcing car buying experiences is changing the game for the better!
Should I Buy New or Used Right Now?
With both new and used car prices still greatly inflated, it’s important to think about how today’s buying decisions could affect your future finances. New car prices are up 6% year-over-year, and 24% since July 2020. There’s no sign of new car prices coming down, and automakers seem to be announcing MSRP hikes weekly.
If you’re determined to buy a new car, don’t expect MSRPs to go down at all. However, more buyers who work with CarEdge are able to buy at MSRP, with some even securing a deal under MSRP. Check out our latest success stories!
Work with dealers selling cars without markups. They’re not common, but they’re certainly out there. With MSRPs likely to increase in 2023, consider yourself a winner if you buy the new car you want with zero markups or dealer add-ons. Don’t forget, you can challenge dealer add-ons!
Better Times Ahead for Used Car Prices
On the other hand, used cars are more negotiable than at any point in time this year. If you’re looking for a better deal, here’s what you need to know: used car prices are declining at the retail level, but we expect price drops to continue for many weeks to come. There will be better deals in the weeks ahead.
While making long-term predictions is difficult right now, we’re confident that used car prices will be even more negotiable (with lower sticker prices) at the end of November than they are today.
If you are in the market for a used car right now, your goal should be to negotiate 5-10% off of the sticker price, or consider waiting a few more weeks (or longer) for the market to soften further.
Is It a Buyer’s Market?
Yes. As a buyer you have more leverage than at any point in the past 18 months. Does this mean used car prices are “good” or “fair”? No way. Used car prices rose 45% in 2021, so finding a true bargain is next to impossible. Used car prices remain inflated, but for those who need a vehicle, market conditions have improved, and are likely to continue to improve. Here’s what’s clear: you have more leverage today than at any other time in 2022.