Thinking of buying a used vehicle? Here’s why Graham Stephan says you should wait

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Don’t overpay for a used car when prices may soon drop.

Key points

  • Graham Stephan thinks used car prices will go down.
  • He describes the current circumstances as one of the worst times to buy.
  • A high number of defaults is one of the main reasons for this.

If you’re in the market for a used vehicle, it might be a good idea to wait a bit before you go ahead with your purchase. Real estate investor, finance expert and YouTube personality Graham Stephan recently explained why he thinks you should postpone your purchase, calling it “one of the worst times for you to buy a vehicle.”

Here’s why Stephan thinks buying now would be a big mistake.

Graham Stephan has proof that vehicle prices could soon drop

According to Stephan, the main reason he thinks the price of used vehicles will drop soon is that delinquencies on car loans are increasing.

Stephan said nearly one in four car loans in Washington D.C. are in default, compared to a default rate of between 2% and 3% in normal times before 2020. He thinks the way loans are originated is the reason default rates are so high in DC and across the country: many dealerships make their profits from financing, rather than selling cars, and lending money to people who don’t cannot afford to pay it back.

Stephan said about 85% of all cars are financed, and a regulatory oversight allowed dealers to issue car loans without performing proper background checks to ensure the loans were indeed in borrowers’ price ranges. Since people cannot pay the loans they have taken out, an increasing number of people are defaulting and their vehicles will be repossessed.

This glut of vehicles that will be repossessed by lenders, coupled with rising gasoline prices, will likely lead to a dramatic drop in demand for used cars, which in turn will cause prices to fall. In fact, he said this trend has already started with an “observable price decline in every segment.”

As he explained, “If we continue on the same trajectory, we could be due an 18% decline in used car values.” For this reason, it would make little sense to buy a used car now, when you can probably get the vehicle for much less next year.

Is Stephen right?

Stephan certainly makes a compelling case that defaults on used vehicles could be on the rise and that this, combined with the high cost of fuel, could make cars cheaper. Of course, there are no guarantees, especially since car prices have risen rapidly due to inflation and supply chain issues.

If supply remains limited and automakers continue to struggle to produce a substantial amount of new cars, prices may not fall as quickly as he expects – especially because many people are buying new cars not because they want to, but because they have to, because something has happened to their old vehicle, like an accident or an expensive repair that isn’t worth it.

Ultimately, whether you’re buying a car now or in the coming months, you need to be sure to research your financing options carefully and decide on the best way to pay for it, whether it’s a loan car, personal loan or cash payment. And you need to be sure to look at price trends and how the cost of the car compares to other vehicles, so you don’t pay more than you should.

By doing your research, you can hopefully get a good car at a reasonable price that you can afford no matter when you buy it.

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