When thinking about used cars, the first thing that often comes to mind is affordability. It’s the charm and selling point of the market — getting a good deal on a car that might be out of reach if it were brand new. However, anyone who has recently browsed a used car lot or online listings may have noticed something unusual. The prices of used cars are climbing. Why might this be the case? Let’s find out.
The law of demand and supply is fundamental in shaping prices across various markets, and the used car market isn’t exempt from this rule.
When the supply of used cars is low but the demand is high (for example, during economic downturns when more people are looking for less expensive cars), prices inevitably go up. It is a clear case of the scramble for a limited pool of resources, pushing prices higher.
If the price of a new car increases, buyers often look for more affordable options, which naturally include looking at used cars.
As the gap extends between the cost of a new car and a similar, used model, used car dealerships are able to charge more, knowing they will still be offering a more affordable alternative to a new car. Thus, new car price increases trickle down to the used car market.
The perception of a used car often being in bad condition is becoming obsolete. Used cars today often come with fewer miles, are better maintained, or even include the latest technology, making them more valuable.
Most used cars dealership Calgary now offer Certified Pre-Owned Vehicles (CPOs). These cars have undergone rigorous testing and often come with additional benefits like extended warranties, which add to their market value and subsequent pricing.
A used car that comes with quality upgrades from its previous owner will no doubt fetch a higher price.
High-quality parts, performance enhancers, state-of-the-art infotainment systems, advanced security features, or even just alloy wheels and leather upholstery can all add value to the car. Since buyers are getting more, they are also expected to pay more.
Then there’s the inevitable force of inflation, which measures the rate of price increases throughout an economy over a period.
As overall prices increase, the costs associated with selling, maintaining, and buying used cars rise, too, contributing to a hike in used car prices. This factor may not be as directly noticeable, but it subtly affects the bottom line of pricing.
The market for used cars isn’t limited to your local area or country. With globalization, the demand for used cars in overseas markets, especially in emerging economies, can significantly affect local prices.
The more cars that are exported, the lower the supply locally. If there is still a high domestic demand, prices will rise, driven by global and local pressures.
A single element doesn’t decide the price of a used car. Instead, it’s a complex interplay of different market dynamics, economic pressures, and product quality-based factors. The rise in used car prices, while inconvenient for buyers, results from this complex system. Understand the causes behind this surge so you can better navigate the market and hopefully find the best deal at the right time.
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