Some consumers are shifting to older models of used cars

If you page through the August consumer price index report, you’ll see one item that’s fallen significantly in price in the past year: used cars and trucks. They were down 10.4% in August from 2023.

That’s the hard data. Here’s the anecdote: The New York Federal Reserve noted in the most recent Beige Book that auto dealers have seen a “shift to older models of used cars for affordability reasons.”

Buying a used car these days might feel a little like time traveling.

“The average consumer coming into the market, their last purchase was about five years ago,” said Melinda Zabritski, head of automotive financial insights at Experian Automotive.

She said the sticker shock is intense. Used cars cost over 20% more than they did five years ago, according to the Bureau of Labor Statistics.

Even though they’ve slipped in price since last summer, it’s enough to make people want to hop in their DeLoreans and return to a cheaper time. Or to look for a car from a cheaper time.

“What’s more affordable is sometimes older vehicles, right, that are more worn or more used,” said Jeremy Robb, senior director of economic and industry insights at Cox Automotive.

He said another reason people are turning to older models is that a lot of younger used cars just aren’t there. 

“Those new cars that weren’t made in 2020, 2021, 2022 — they affected the new car market back then, they’re really starting to affect the used car market now,” Robb said.

The majority of cars sold in the U.S. are used, said Zabritski.

And while older models may come at a lower price, they do have downsides. It can be harder to get a loan for one, for example.

“A lot of mainstream lenders won’t finance a vehicle that’s over nine model years old,” said Zabritski. “You know, you’re starting to look at bringing more cash into that purchase.”

And people who’ve bought old model, high-mileage cars in the past few years are now having to deal with owning old model, high-mileage cars, said Robert Frick, an economist with the Navy Federal Credit Union.

“They’re breaking down,” he said. “And to add insult to injury, repairs are a lot more expensive now.” Some of that is because parts and labor have become more expensive.

In the U.S., our car tends to be an expression of our identity, Frick added. And it hasn’t sunk in that owning one now is a more expensive proposition. 

“It will. Maybe it’ll take a generation, maybe it’ll take five years, but it’s going to sink in eventually,” he said.

Frick said people need to start to looking at their cars as a utility: something that’s functional and gets the job done, even if it’s not the latest model.