Due to the shortage of new vehicles at dealerships caused by the COVID-19 pandemic, consumers have seen used vehicle prices soar. Last September, reports claimed that the average price of a used vehicle had increased by more than 16% in June 2020. Things started to calm down in October 2020 when the average used vehicles traded in dealers fell to $ 15,874. While the situation is improving now that automakers have got the situation under control, consumers are seeing incredibly high payments for used cars.

According to a report of Experiential, the average monthly payment for a used vehicle in the fourth quarter of 2020 was $ 413. In the same quarter of 2019, the payment was $ 395 and $ 381 in 2018. The average loan term has also increased, as it averaged 65.58 months in the fourth quarter of 2020, 64.67 in the same period. quarter of 2019 and 64.10 in Q4 of 2018.

As might be expected, monthly payments for used vehicles were higher in the fourth quarter of 2020 because consumers received more funded money. Last year, the average consumer financed $ 22,467 for a used vehicle in the fourth quarter. That’s a big increase from 2019 ($ 20,824) and 2018 ($ 19,712). Interest rates, however, are lower than they have been in recent years. The average rate of used car loans was 8.43% in 2020 against 9.05% in 2019 and 9.42% in 2018.

The trend to buy used cars was mainly driven by the lack of new vehicles available at dealerships at the height of the pandemic, but the price of new vehicles is also playing a big role in the situation. At the beginning of the year, Edmunds reported that the average price for a new car was $ 40,107 as of December 2020. The average new car buyer received an interest rate of 4.6% and considered a monthly payment of $ 581 for more 70 months. While $ 413 for a used car seems high, $ 581 is absurdly high.

More affordable prices compared to new vehicles are the main factor in choosing a used option for consumers. We’ve seen automakers come up with some pretty good deals on used vehicles, which could also attract buyers to used vehicles.

As with new cars, we expect monthly payments for used vehicles to continue to increase in the future. As new vehicles get more and more expensive each year, this trend will certainly affect the prices of used vehicles.

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