Should I Trade in my Car Now?

Q: I’ve heard used cars fetch a pretty penny right now because of a shortage. Should I trade in or sell my car?

A: The auto market has been red-hot for months. While circumstances vary, this can be a great time to land top dollar on your used car. 

Here’s what to know about the current auto market for sellers.

How high did prices go?

According to online automotive resource Edmunds, the average transaction price for a used car in quarter two of 2021 was $25,410, up 21% year-over-year. It’s the first time the average list price for used cars in the U.S topped $25K.

Why have the prices of used cars increased so much? 

Several factors have led to auto prices ramping up. 

First, the pandemic put a freeze on new vehicle production for nearly a full business quarter. New car sales dried up, as did the usual trade-ins that accompany new car sales.  

With production on pause, chipmakers stopped creating semiconductor chips for automakers. When production resumed, manufacturers faced a shortage of chips, limiting the number of new cars they can make.

A third factor influencing the current market trends is the months-long shutdown of travel during lockdowns. Car rentals were virtually unused at this time, prompting agencies to hold onto cars instead of selling them to used car dealerships. 

All these factors contributed to a dearth in supply of used cars, thus driving up their prices. 

Will the market settle down soon?

Auto prices already show signs of leveling, with some used car prices dropping by as much as $2,000 over July. Many drivers are now trying to sell their cars at top dollar, which is putting more used cars into the market. Car rental agencies are also recovering from their pandemic freeze, adding their vehicles to the pool. 

Should I trade in my car now? 

With inventory still low, you’ll likely get more money than you’d expect for your car. However, remember that those same inflated prices will work against you if you plan on buying a new car at this time.