Car buying and selling in USA -- now or later?
September 7, 2021 8:16 PM Subscribe
My spouse and I plan to downsize from two cars to one, and also to replace the cars with one that is new to us. I realize that there is dearth of cars for sale in the USA right now. But, given that, we are debating buying a diffrerent car now or waiting until prices come down.
The advantage of buying sooner is that we owe about $3,000 on one of the current cars (the other is paid off) and would avoid making payments of about $160 a month.
We plan to get a smallish SUV and are leaning toward a Subaru Forester. We haven't decided whether to get a new or used car.
So, would you buy now, with higher prices but avoiding more payments on the current car, or later?
The advantage of buying sooner is that we owe about $3,000 on one of the current cars (the other is paid off) and would avoid making payments of about $160 a month.
We plan to get a smallish SUV and are leaning toward a Subaru Forester. We haven't decided whether to get a new or used car.
So, would you buy now, with higher prices but avoiding more payments on the current car, or later?
In addition to the terms of the loan, it’s also worth doing some initial research on the car you intend to buy. There’s waiting lists at dealerships for certain popular makes of cars, due to the chip shortage, so you may need to put a deposit down now and still may have to wait 2-4 months anyway.
Depending on where you are in the US, you may be able to sell that car and just pay off the loan with the premium you will command. This may be worthwhile if you’re planning anyway to reduce to one car only.
posted by hampanda at 9:12 PM on September 7, 2021
Depending on where you are in the US, you may be able to sell that car and just pay off the loan with the premium you will command. This may be worthwhile if you’re planning anyway to reduce to one car only.
posted by hampanda at 9:12 PM on September 7, 2021
Are your cars mechanically sound and safe to drive? I generally discourage people who still have loans on their current vehicles from buying a new one. In general, it's best to pay off the loan, keep the car as long as reasonable, and save up money for a new car while you don't have any payment.
posted by coberh at 10:23 PM on September 7, 2021 [1 favorite]
posted by coberh at 10:23 PM on September 7, 2021 [1 favorite]
Response by poster: The interest rate on the current car is about only 3 percent. There is no point to paying it off early.
We have decided to get a different car. That is not in question. Our question is whether to do that in the next few months or the next year or so. The current cars don't really suit us. They were bought in a time crunch.
posted by NotLost at 10:37 PM on September 7, 2021
We have decided to get a different car. That is not in question. Our question is whether to do that in the next few months or the next year or so. The current cars don't really suit us. They were bought in a time crunch.
posted by NotLost at 10:37 PM on September 7, 2021
I don't quite understand what you mean about the advantage of buying now or the loan etc. Presumably interest on it is high and you'd rather pay it off in one lump sum, but can't do that until you get the cash from selling one of the cars? That doesn't have anything to do with when you buy, necessarily, just with when you sell. If you had $3k now you could pay off the loan and be in the same situation.
Which I guess brings me to the other question. Can you sell one now (whichever one you think is more overvalued, I guess?) and get by with a single car while you wait to see if the market for the new one gets better?
In general I figure every time you buy new, you are losing money in the short term (depreciation when you drive it off the lot) but hoping to make it back in the long term. So I would not buy a car "temporarily" while you wait for the car you want, if that was what you were asking re: buying a "different" car.
posted by Lady Li at 11:39 PM on September 7, 2021
Which I guess brings me to the other question. Can you sell one now (whichever one you think is more overvalued, I guess?) and get by with a single car while you wait to see if the market for the new one gets better?
In general I figure every time you buy new, you are losing money in the short term (depreciation when you drive it off the lot) but hoping to make it back in the long term. So I would not buy a car "temporarily" while you wait for the car you want, if that was what you were asking re: buying a "different" car.
posted by Lady Li at 11:39 PM on September 7, 2021
Best answer: First, I would look at the prices for the cars you have and the car you want to buy. I’d look at the prices now, and I’d look at what the prices were in 2019, and compare them. If they’re both up by the same amount (e.g., car you want to sell is currently worth 3k more than 2019 and car you want to buy is currently worth 3k more than in 2019), I’d go ahead and do the sell/buy now - you’re basically coming out even. If the car you want to sell is up more than the one you want to buy, even better - you’ll make money on the exchange (or, at least, spend less than you would have if prices are more normal). If the car you want to buy is up by more than the one you want to sell, you will have a number for how much it will cost you to do the buy/sell now vs wait; e.g., if the car you want to sell is worth an extra 3k, but the car you want to buy is worth an extra 5k, you’re spending 2k more than you would if prices were normal. Maybe it’s worth it to you to spend that 2k to get the car now instead of in a few years - maybe not.
Either way, I’d go down to one car now if that’s feasible for you even without the upgrade - that will take advantage of the higher used car prices for now.
posted by insectosaurus at 3:57 AM on September 8, 2021 [2 favorites]
Either way, I’d go down to one car now if that’s feasible for you even without the upgrade - that will take advantage of the higher used car prices for now.
posted by insectosaurus at 3:57 AM on September 8, 2021 [2 favorites]
How would one look at what the prices were for cars in 2019?
posted by jacquilynne at 6:30 AM on September 8, 2021
posted by jacquilynne at 6:30 AM on September 8, 2021
Both used and new car prices are up, and since you have two used cars to sell, that should offset at least some of the pandemic-related high cost of the new car (or, new-to-you used car, if you go that route). So, depending on what you buy and how you approach selling the old cars, it may be a bit of a wash.
There are enough other savings from going down to one car (like insurance and maintenance) that I would guess the right thing would be to start the shopping process now, but with enough patience to figure out the best approach locally.
posted by Dip Flash at 6:38 AM on September 8, 2021
There are enough other savings from going down to one car (like insurance and maintenance) that I would guess the right thing would be to start the shopping process now, but with enough patience to figure out the best approach locally.
posted by Dip Flash at 6:38 AM on September 8, 2021
Best answer: jacquilynne, I just googled “Subaru forester price history” and the first hit was for this useful car gurus price trends page. Looks like a 2018 Forester was a little over 24k at the end of 2019, hit a low of around 21.5k in March of this year, and is now worth around 25k. The 2017 and 2019 models followed a similar pattern.
posted by insectosaurus at 8:17 AM on September 8, 2021
posted by insectosaurus at 8:17 AM on September 8, 2021
Best answer: Foresters are in two classes of cars that are just being walloped by inflationary pressure right now: 1) any CUV crossover at all and 2) any Subaru at all.
I doubt you can find one new right now that is exactly what you want, or in any form at a price that is less than a significant markup *over* MSRP. The impact on the used market is astounding. Foresters (and RAV4s, and CZ-5s, and CRVs, and Rogues, and Tucsons and to a lesser extent any domestic crossover) are easily up 20-30% right now compared to late 2019. High mileage cars with issues are going for amounts that would have gotten you a low mileage car with a clean bill of health in 2019.
POV: I’m a car nut who shops the classifieds for fun most days looking for particular needles in a haystack, and I’ve also helped half a dozen friends buy cars in just the last few months (it isn’t just the chip shortage, it’s the demand that’s through the roof, people who would not have owned cars 2 years ago all seem to want one now) and it’s a war zone out there. Unless you can buy through a family or friend connection, all the trust factors and scam avoidance techniques are out the window too, as with housing. You want to get that used 2010 Outback with 100k miles selling for $6500 *inspected?* Forget it, the seller has another buyer coming over in 20 minutes with cash in hand who doesn’t care if the head gaskets are about to go. (I also privately sold a 2003 Honda Civic about a month ago, and of all the cars I’ve ever sold, this was the easiest by far. I asked below market and it was gone in two days, to the second person who looked at it, who was a mechanic himself, while the first one dithered about getting it inspected, which was fine with me but hey, cash on the barrel head right now talks louder than two days of hassle and delay.)
Guy who bought it will probably make a few cheap improvements and flip it for $1500 more than I got from him. This car had almost 200k miles and some rust. Didn’t matter.
Every voice in the automotive media is saying wait if you possibly can. As pointed out above, your big advantage in this market is you have a good car to sell. And if you can really get by on one car the obviously financially smart thing to do is sell the car you owe money on for what is likely a 20% or better premium that will likely recede in just a few more months, just limp the other car through winter as best you can (remembering you’re getting PAID for this PITA), and return to the market next spring or whenever prices calm down and save 10-20% off what you’d spend now. Combine selling at a premium with the time value of your unspent money, a paid off loan, and not having to maintain or insure a second vehicle, with the averted depreciation hit of buying at the top of the market, and the savings of waiting for prices to settle down (of course never guaranteed), and you’re looking at a number that likely pays for a good chunk of a less inflated-priced vehicle next year.
You also wait out a critical technical moment in the auto industry. Next year’s hybrid, PHEV, and BEV options will be LIT compared to what’s available now. I’ve been arguing with some folks lately that buying a new ICE commodity vehicle right now at any price is taking on a novel depreciation risk given the quick timeline to widespread electrification of the fleet in the US (and Canada and Europe). You may be paying top dollar for a VHS deck in 1998. It is quite possible ICE cars will depreciate more rapidly than their historical average due to falling demand in less than a decade.
posted by spitbull at 8:18 AM on September 8, 2021 [13 favorites]
I doubt you can find one new right now that is exactly what you want, or in any form at a price that is less than a significant markup *over* MSRP. The impact on the used market is astounding. Foresters (and RAV4s, and CZ-5s, and CRVs, and Rogues, and Tucsons and to a lesser extent any domestic crossover) are easily up 20-30% right now compared to late 2019. High mileage cars with issues are going for amounts that would have gotten you a low mileage car with a clean bill of health in 2019.
POV: I’m a car nut who shops the classifieds for fun most days looking for particular needles in a haystack, and I’ve also helped half a dozen friends buy cars in just the last few months (it isn’t just the chip shortage, it’s the demand that’s through the roof, people who would not have owned cars 2 years ago all seem to want one now) and it’s a war zone out there. Unless you can buy through a family or friend connection, all the trust factors and scam avoidance techniques are out the window too, as with housing. You want to get that used 2010 Outback with 100k miles selling for $6500 *inspected?* Forget it, the seller has another buyer coming over in 20 minutes with cash in hand who doesn’t care if the head gaskets are about to go. (I also privately sold a 2003 Honda Civic about a month ago, and of all the cars I’ve ever sold, this was the easiest by far. I asked below market and it was gone in two days, to the second person who looked at it, who was a mechanic himself, while the first one dithered about getting it inspected, which was fine with me but hey, cash on the barrel head right now talks louder than two days of hassle and delay.)
Guy who bought it will probably make a few cheap improvements and flip it for $1500 more than I got from him. This car had almost 200k miles and some rust. Didn’t matter.
Every voice in the automotive media is saying wait if you possibly can. As pointed out above, your big advantage in this market is you have a good car to sell. And if you can really get by on one car the obviously financially smart thing to do is sell the car you owe money on for what is likely a 20% or better premium that will likely recede in just a few more months, just limp the other car through winter as best you can (remembering you’re getting PAID for this PITA), and return to the market next spring or whenever prices calm down and save 10-20% off what you’d spend now. Combine selling at a premium with the time value of your unspent money, a paid off loan, and not having to maintain or insure a second vehicle, with the averted depreciation hit of buying at the top of the market, and the savings of waiting for prices to settle down (of course never guaranteed), and you’re looking at a number that likely pays for a good chunk of a less inflated-priced vehicle next year.
You also wait out a critical technical moment in the auto industry. Next year’s hybrid, PHEV, and BEV options will be LIT compared to what’s available now. I’ve been arguing with some folks lately that buying a new ICE commodity vehicle right now at any price is taking on a novel depreciation risk given the quick timeline to widespread electrification of the fleet in the US (and Canada and Europe). You may be paying top dollar for a VHS deck in 1998. It is quite possible ICE cars will depreciate more rapidly than their historical average due to falling demand in less than a decade.
posted by spitbull at 8:18 AM on September 8, 2021 [13 favorites]
Best answer: Oh as to jacquilynne’s query above, historical used car prices and trends are widely available. One easy to use source (albeit it only goes back a year) is this page at CarGurus.
Stare at that right hand year over year column. It’s shocking. The cars most Americans really want are hitting a 30% differential.
I wouldn’t touch this market as a buyer unless I had absolutely no other options. Unlike real estate, there’s zero upside to match the downside risk. Cars are a depreciating asset, period.
No seriously, add up selling your current car for 20% more than it was worth last year, and paying 25% less on a new car next year (maybe), and you’re talking real money.
posted by spitbull at 8:39 AM on September 8, 2021
Stare at that right hand year over year column. It’s shocking. The cars most Americans really want are hitting a 30% differential.
I wouldn’t touch this market as a buyer unless I had absolutely no other options. Unlike real estate, there’s zero upside to match the downside risk. Cars are a depreciating asset, period.
No seriously, add up selling your current car for 20% more than it was worth last year, and paying 25% less on a new car next year (maybe), and you’re talking real money.
posted by spitbull at 8:39 AM on September 8, 2021
If you have two cars now and intend to have one car, the obvious move is to sell one car now, use the other one for six months, and then buy your desired car when prices come down (selling the other). That way you get the advantage of the current high prices as well as the advantage of future (presumably) lower prices. Win-win.
posted by alexei at 12:21 PM on September 8, 2021 [1 favorite]
posted by alexei at 12:21 PM on September 8, 2021 [1 favorite]
Response by poster: Thanks for all the input. I am going to do more research but expect to wait a good while to buy the car.
posted by NotLost at 8:41 PM on September 9, 2021 [1 favorite]
posted by NotLost at 8:41 PM on September 9, 2021 [1 favorite]
We just got a new truck this week. The ridiculous used car prices allowed us to get out of a (paid off) car that we didn't like at all - the trade-in value at the site spitbull mentioned above was up 15% YOY and the dealer really, really wanted that used car so we were able to get them to come up even more. We knew we eventually wanted a small truck and that we didn't want to have that 6 year old car anymore.
We weren't able to dicker at all over the price of the new truck, but that's the only part that I feel like didn't work for us. The price was right at sticker. We were able to get 70% more than some dealers offered us 3 years ago on trade. It's absurd out there right now for trade in value.
posted by getawaysticks at 11:30 AM on September 19, 2021
We weren't able to dicker at all over the price of the new truck, but that's the only part that I feel like didn't work for us. The price was right at sticker. We were able to get 70% more than some dealers offered us 3 years ago on trade. It's absurd out there right now for trade in value.
posted by getawaysticks at 11:30 AM on September 19, 2021
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I own a 3 year old Forester and just bought out the lease. I'm going to keep it, but if I weren't I could have sold it to Carmax for $8000 more than it cost to buy out the lease. So the value of a three year old Forester in 2021 is $8000 more than Subaru thought it would be three years ago. That's how high used prices are right now.
posted by caek at 8:38 PM on September 7, 2021 [6 favorites]