Used Cars Are Now Selling For More Than New Cars
Supply and demand issues have created the rare occurance where used cars can cost more to buy than new cars.
www.motor1.com
As if the year 2020 weren't bad enough for many of us, 2021 appears to be far worse. At least when it comes to buying your next car. Thanks to record shortages of new vehicles, many used cars are selling for more money than their exact new car counterparts.
The average used car is now nearly 30 percent more expensive than it was last year right before the lockdowns. Used car prices have also increased 1.7 percent in each of the last three weeks according to Cox Automotive, which tracks over six million vehicles a year at wholesale dealer-only auctions.
Let's use the Kia Soul as an example. According to TrueCar, a brand new 2021 Kia Soul LX registers a price of $17,724.
And yet, this one-year-old 2020 Kia Soul LX in the same color and with identical options went for an eye-popping $18,500 this morning at the largest wholesale auction company in the world, Manheim Auctions. That's with 5,000 miles on its odometer and what the auctioneer announced as "contaminated oil."
That’s not all. The buyer had to also pay a $500 auction ‘buy fee’. If you add a $200 post-sale inspection, transport costs, and removing the contaminated oil , that price difference widens to between $1,500 and $2,000 more for the used model.
This 2016 Kia Rio LX (below, left) was the exact type of car that sold for cheap a few months ago. Small subcompacts with few options are usually available for less than $10,000 once they are three years old. Today it sold for $12,400 plus a $500 buy fee. That’s over $4,000 more than its forecasted wholesale average price of $8,275.
Even unpopular and damaged cars are getting stiff price premiums. A 2017 Hyundai Accent with nearly 75,000 miles and a bad transmission went for $8,000 versus just a $5,700 wholesale average.
SUVs without issues are also still as popular as ever. Before I walked out of the auction today and ripped up my bidder badge, I saw a 2019 Ford Escape SEL with 21,000 miles (above, right) that would normally be worth only $19,150 sell for a jaw-dropping $22,400 plus an even bigger auction fee than that Kia Rio.
If you lease a vehicle, you may want to consider buying it out at the end of the lease and selling it yourself.
Why is this happening? Supply and demand.
Plants are shuttering and reducing output due to microchip shortages. Today’s cars require computers, chips, and sensors. No chips? No cars!
Americans are also on tap to receive over $2.5 trillion in stimulus money along with hundreds of billions in tax refunds. Some of which go back to 2019. If you price in the American Jobs Plan, which may add another $2 trillion to the American economy, you get the perfect storm of demand in a car market that is now quickly running out of supply.
If you have an extra car you don’t need, sell it. In my 22 years as a car dealer I have never seen prices this high.
