Eagerly anticipated tax refunds, falling used-car prices due to increased supply, relatively low interest rates for vehicle financing, and generally improving vehicle dependability – a major reason the average age of vehicles on American roads has climbed to over 11 years – create a near-perfect opportunity for used-car shoppers in 2014.
Those shoppers are expected to drive off with at least 42 million used cars, trucks, crossovers and SUVs. In many cases, the car-buying fever begins with a tax refund check.
Millions of taxpayers expect to spend their tax refunds to purchase a new or used car, suggests the report “Use Your Tax Refund to Buy a Used Car” by Keith Griffin at About.com. “Based on the info in [an] eBay Motors survey, Americans appear to view tax refunds as opportunities to make purchases of vehicles associated with the joys of driving,” Griffin wrote.
But refunds, expected to average more than $2,500, are just one reason now may be the time to buy.
Falling used-car prices, brought on by a glut of vehicles hitting the used-car market, may be “music to your ears” if you’re buying, writes Philip Reed of Edmunds.com.
National Automobile Dealers Association’s NADA Used Car Guide predicts prices of used vehicles up to four years old will decline an average of 2.5 percent in 2014. The price drop for vehicles older than that will be smaller, but the drop still contrasts with used-car price increases of 18 percent since 2007.
Meanwhile, “interest rates on auto loans should stay at very attractive levels throughout 2014 … [with the best] used car rates below 5 percent for much of the year,” according to Bankrate.com.
“It’s still a low-rate environment,” said a Bankrate.com spokesman.
And while dependability ratings took a hit with 2011 models, according to J.D. Power and Associates, used-car dependability generally has been on the uptick. Problems with some vehicles in 2011 “contributed to a decline in vehicle dependability [on average] for the first time in more than 15 years,” which still leaves a lot of room for used-car buyers to find dependable vehicles.
Here is a portion of J.D. Power’s overview of used vehicles generally in its 2013 dependability study:
- Dependability of three-year-old models  is at an all-time high. You should feel especially confident buying a certified pre-owned (CPO) vehicle.
- Improvements in vehicle dependability have been made by both domestic and import brands, and the gap between the two is narrowing. Perceptions of dependability should not be based purely on vehicle origin – consumers should research a variety of sources in order to make a decision consistent with the current reality of the market.
Of course, it’s possible that those reasons combined aren’t enough to put you in a buying frame of mind, but if you are, they may suggest there’s no time like the present.