I walked into a McLaren dealer after reading this stupid article looking for a used P1. The bastard wanted a million dollars! I might as well buy a new one.
The $20,000 Reason to Buy a Used Car
Falling prices improve the math for used cars versus new ones
By Dalvin Brown, WSJ
Nov. 13, 2024 9:42 am ET
Used-car prices dropped 6.2% in the first three quarters of this year to an average of about $27,000. Photo:
Prices for used cars shifted into reverse this year, and the price gap between used and new cars has never been larger.
This improves the case for buying used instead of new. It doesn’t help anyone hoping to trade up for a new model, however, since older cars’ value are depreciating faster than usual.
Surging prices for both new and used cars helped drive up inflation in 2022. Even though inflation has cooled since then, as Wednesday’s consumer-price index shows, used-car prices fell much more than new ones. (They did tick up slightly in October.)
The average transaction price of a new car has hovered around $47,000 for the past two years, according to Edmunds. Used-car prices, meanwhile, dropped 6.2% in the first three quarters of this year to an average of about $27,000.
Buyers could save a record $20,000, on average, by choosing used over new, according to Edmunds’s analysis of third-quarter sales. The gap was closer to $15,000 a few years ago. That doesn’t mean used cars are any cheaper to own. Insurance, maintenance and repairs have all grown more expensive.
Used-car economics
Used-car prices have dropped in part because there is now a greater supply of all vehicles on the market, according to Edmunds. And since people are driving their cars longer, the average age of vehicles on the road has grown older.
The price drop helps used-car buyers offset the other rising costs of ownership at a time when a minor fender bender can become a $10,000 fix. Interest rates on car loans also remain high.
Buyers eyeing a new Tesla Model 3, priced at $42,490, could find a used one from 2021 averaging $25,400, according to car-research firm CarGurus. If they can negotiate the price to under $25,000, they might qualify for a $4,000 federal tax credit for used electric vehicles, bringing the cost to $21,000.
“Today’s drivers are being hit with a trifecta of rising costs—car values, insurance rates and still-high interest rates,” said Kevin Roberts, director of economic intelligence at CarGurus. “This translates to a monthly payment calculation that demands a lower price for many of today’s shoppers.”
With Apple CarPlay, advanced safety systems and other amenities found in cars dating back eight or 10 years, there isn’t as big a feature gap as there was in the past when buying used.
And it helps that vehicles now often last well beyond 200,000 miles.
“You used to never want to buy a used car with anything approaching 100,000 miles,” said Karl Brauer, an analyst at iSeeCars.com, a car-buying marketplace. “Now you can buy a 120,000-mile Toyota that is barely over halfway through its easily estimated lifespan.”
New-car prices
New-car prices stayed high because automakers cut production of lower-priced versions of their vehicles, focusing instead on premium models. Given the number of affluent buyers looking for more expensive tiers, Brauer said, “they’re fine selling fewer cars at higher profit levels.”
New superpremium versions of popular models make the used-car deals even more attractive. Toyota started offering a Capstone trim that is a step above its already high-end Platinum model. GMC added a Denali Ultimate at the high end of its popular SUV line.
Dealers can offset new-car prices with deals and incentives, currently averaging about 6% of the transaction price—or roughly $3,000—according to analytics firm J.D. Power. Combined with dealer-exclusive financing rates, these deals can sometimes make new cars more attractive than nearly new used vehicles, industry analysts say.
It is important to do the math, though, and compare total costs, including interest paid over time, instead of focusing solely on the monthly payments.
“While new cars may offer low APR incentives, the overall higher cost and financing terms often make used cars a better fit for those on a tighter budget,” said Brian Moody, executive editor at car marketplace Kelley Blue Book.
Write to Dalvin Brown at dalvin.brown@wsj.com
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