Used-car transaction prices reached a record high in 2016, thanks to an influx of late-model vehicles and the continued popularity of trucks and SUVs, according to the Edmunds 2016 Used Vehicle Market Report. The average price of a used car was $19,189, a 3.4 percent increase from 2015.
Edmunds analysts attribute the price increase to the relatively new inventory of used cars: 58 percent of used vehicles sold were 3 years old or newer. The continuing popularity of trucks and SUVs, which tend to cost more, also helped drive up the average price.
Certified pre-owned (CPO) vehicles represented a record-high 22.8 percent of franchised dealer used-car sales and, given the premium price they command, also helped contribute to the rise in used-car prices.
One bright spot for used-car shoppers was record-low financing rates in 2016. The average rate was about 7.5 percent, with some of the better deals appearing in the manufacturer-supported CPO programs. However, the length of loans did creep higher, and at an average of 66.8 months, they are now within striking distance of new-car loan terms.
"While low-interest rates and consistent values are making it possible for the market to absorb these newer, more expensive off-lease vehicles, demand for older, less expensive used vehicles hasn't waned," said Ivan Drury, Edmunds senior analyst.
But there are fewer of these older used cars in the market. In 2016, fewer new-car buyers traded in older vehicles, which are, on average, about 6 years old. And so, though newer used cars are plentiful, they are more expensive. The cheaper, older used cars are more scarce, and their prices don't seem to be coming down very much.
This means car dealers and private-party sellers are in the driver's seat when it comes to setting prices.
"With fewer older vehicles available, it puts the seller at an advantage, particularly those looking to sell vehicles that are in high demand, like trucks and SUVs," said Drury.