If you’re thinking about buying a used car, you may want to budget more than you initially planned, as a new survey suggests consumers tend to think used cars cost much less than they actually do.
Financial services company Ally Financial surveyed 2,012 adults to get their perceptions of the used car market. It learned that many consumers are misinformed.
For one thing, the used car market has newer cars than many consumers think. Respondents thought the average age of a used car when purchased was 6.6 years old. However, the average age of used cars at the point of sale is actually four years old, according to the 2019 Edmunds Used Vehicle Report. Nearly one-third — 31% — of respondents thought the average used car was eight or more years old.
In addition to misjudging the age of the average used car, respondents also tended to underestimate how much a used car will cost. In fact, survey respondents estimated the cost of a used vehicle to be, on average, $9,860. However, in reality, Edmunds puts the average price of a used vehicle at the time of sale at $20,664 — more than twice what respondents thought. In fact, only 10% of respondents correctly guessed that the average price of a used car at purchase was more than $20,000.
While the survey found a general lack of knowledge surrounding the used car market, consumers who earned more money tended to value used cars the highest.
On average, consumers who made under $50,000 per year estimated a used car would cost $7,684, while those who made between $50,000 and $74,999 thought the average cost would be $9,225. Those who earned between $75,000 and $99,999 pegged used vehicles to cost, on average, $10,735, while those who made $100,000 or more believed used cars to cost, on average, $11,938.
Homeowners also placed more value on used cars than renters, with homeowners estimating the cost of a used car to be an average of $10,604, compared to renters’ average estimate of $7,876.
Age also could play a role in consumers’ perceptions as younger consumers tend to assume a used car will cost less. On average:
- Those between ages 18 and 34 estimated used cars to cost $8,513
- Those between ages 35 and 44 put the estimated cost at $9,567
- Those between ages 45 and 54 said they thought a used car would set them back by $10,907
- Those between ages 55 and 64 pegged used vehicles to cost, on average, $10,806
- Those 65 and over estimated used cars to cost $10,385
You might spend less money buying a used car than you would a new car, but, in many cases, you’re still making a major purchase. Take the time to research the used car market to determine average used car prices so you can identify a good deal when you see one. If you’re financing the vehicle, compare auto loans to get the best rate. You may decide that you’d like to buy a car from a private seller. If you do, make sure you’re aware of the pros and cons.