Buying a new car vs. used: What to consider
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Buying a new vehicle in today’s challenging automotive market can be tough, from shortages to rising prices.
New car prices are on the rise, hitting a record high over $47,000 on average this spring. Used cars are selling, on average, around $28,000.
But unlike the new car market, which is dependent on manufacturers, used cars are more plentiful.
“Shoppers will likely find that it’s a little bit easier to find used vehicles, the inventory for used hasn’t dropped as significantly as it has for new cars,” said Jane Ulitskaya, news editor at Cars.com.
New vs. used?
There are advantages and disadvantages to each.
Consumers will likely have a better chance at finding a used vehicle they want, since stock is more easily replenishable. But, they should be prepared to pay higher prices than in years past, Ulitskaya said.
When demand for new vehicles increased but global computer chip shortages slowed production, consumers couldn’t get the cars they wanted. That meant more buyers turned to used cars, which pushed up values, Ulitskaya said.
“The two are intertwined,” she said.
Despite the rise in costs, consumers would still pay significantly less in used car monthly payments than for newer versions of the same model, Ulitskaya said.
Bargaining chips
Having a vehicle to trade in or sell can be a huge help when purchasing something new.
Since used cars have had a spike in value, the trade amounts rose significantly, which could be good news for people eager to get a new ride, Ulitskaya said. Getting more for your trade-in may not cover the higher costs of a new vehicle, but it could put a nice dent in it.
Ulitskaya said Cars.com did a survey on whether dealers are paying more for trade-ins than they did two years ago, and about 99% said yes.
Of those dealers, 60% estimated that the increased payout for trade-ins is up to 20% higher. And about 30% reported payouts greater than 20%.
Depreciation? What’s that?
Used vehicles that are only a few months or a year old, and have low mileage under 10,000, have been selling at almost the same price as new cars.
There’s been little to no depreciation on late model vehicles, said Ivan Drury, senior manager of insights at Edmunds.
Consumers might be shocked to find out how much their used car of two or three years could be worth. A 10-year-old vehicle could be worth around $15,000, a significant jump from a few years ago when the same vehicle might have been worth around $9,000, Drury said.
If consumers think their used car is worthless, in most cases it’s not.
“You think you’ve got 150,000 miles, guess what — that is not even touching the barrier of what people are willing to buy at this point in time,” he said.
This story was originally published May 6, 2022 at 5:00 AM.
