Why January Is a Great Time to Buy a Used Car
BOSTON ( TheStreet) -- U.S. auto dealers just recorded their best December new-car sales in six years -- making January a great time to buy used vehicles as firms scramble to unload all of the trade-ins they just took in.
"If you traded in a vehicle in December, it's more likely than not still available [for resale] in January," says Richard Arca of car-buying site Edmunds.com.
Arca says a confluence of factors should favor used-car buyers in this period:
- Dealers sold 1.36 million new cars and light trucks in December as an improving economy and end-of-year "sale-a-thon" promotions boosted demand. That's the best December showing since 2007, before consumers felt the Great Recession.
- Strong December sales mean dealers have plenty of used vehicles on their lots, given that about half of new-car purchases involve trade-ins and used cars take around 45 days on average to resell.
- Plenty of consumers took out three-year leases during the downturn instead of buying, so cars leased in late 2010 and early 2011 are just returning to dealerships now for resale.
- Used cars typically lose a good chunk of their value when the clock strikes midnight New Year's Eve and models suddenly become one year older in many buyers' minds. For instance, Edmunds says the typical 2009 model sold for $19,392 in December 2012 but $18,738 in January 2013 -- a 3.4% drop in just one month.
- An improving economy means more and more consumers want new vehicles instead of used ones, reducing used-car demand.
- That's all good news for used-vehicle buyers, who've faced higher prices and a smaller-than-normal inventory of vehicles to choose from in recent years.
The tough economy meant fewer Americans could afford new cars, boosting demand for used vehicles even as the supply of trade-ins available for resale dropped.
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