In recent times, the dilemma of whether to choose a new car over a used one seems to have become even more complicated as the two markets have their own dynamics. New insights from Edmunds reveal that the gap between new and used cars exceeds $20,000 for the very first time in history. In the previous quarter, the average new vehicle sold stood at $47,542, while the average amount spent on a pre-owned vehicle was $27,177. These statistics paint a picture of a financial chasm between acquiring a new car and getting an old one, and though used car sales experienced a slight dip – 6.2% lower than last year – the prices remain a serious import barrier for a number of customers.
Even though there has been a recent reduction in the prices of used cars, it does not completely heal the wounds caused by the inflation vehicle-buyers experienced for the better part of the last three years. According to Edmunds’ report, since the vehicles men got used to in the third quarter of 2019, the average used car price has gone up by a notable 31.4%. Such an increase is due to several reasons such as the rush to buy up cars when the world was hit by pandemics, and the aftereffect of that economy in the cost of goods available. The slight changes in the prices may create some optimism for the future, but certainly do not change the situation for the better completely, and one should be ready to spend considerable money for a used vehicle.
As part of the analysis, Ivan Drury, director of insights at Edmunds, the study’s author, explained why used prices are falling slowly rather than going down. Drury noted that cars wanting shoppers who wanted new cars but they were too expensive are finding used cars quite in demand. Turning to the used car market instead, many of these would-be buyers who have their sights set on new cars have instead focused on used cars and continued to keep up demand and price levels.
The reasons for this continuing appetite for sold cars include factors other than just the turning away from new cars in favor of pre-owned ones. The limited used car supply available to the market is principally due to the reduction in the number of cars for car transactions, trade-ins when new cars are purchased. Because of the reduction in the number of people buying cars and the subsequent trade in of the used cars, the supply of used cars available to used car buyers is constrained. A related problem is that the rental car companies, that singularly provide a constant flow of almost all new cars to the used market, have also tended to retain their cars for longer periods than normal. Part of the problem is that these companies have had problems getting new cars, so they have kept their fleets rather than increasing the supply of used vehicles.
Moreover, off-lease vehicles were also a reliable supply of used cars in the past, but this source has been influenced as well. Usually lease conditions allow the consumer to buy the car at the end of the leasing term. In recent times, due to an increase in the prices of second-hand cars, more and more leaseholders are inclined on purchasing the cars instead of returning them hence less cars for resale. The situation is made worse for the consumers in need of a second car as even off-lease cars are becoming less and less available in the market.
In view of this, it is a complex question for the consumers, whether to go for a new or a used vehicle. While the price premium on new cars may deter a number of buyers, the situation is compounded in that even there is limited supply and elevated prices in the used car market. It is safe to assert that demand will remain strong owing to the demand for used vehicles as growth in supply is limited, lasting out high prices for a while except for a gradual drop.
In making a choice, personal finance is most paramount. The prospect of cost savings that comes with buying used as opposed to brand new cars may be enticing, however, buyers need to keep in mind that even second-hand prices, there is already quite an addition to the prices as compared to pre-pandemic prices. Nevertheless, the very large price difference which a consumer who wants to buy a new car is likely to come across may put him off looking at the new market and possibly lead such consumers to the used market which may pose its own challenges.
To conclude, the consumer has an impossible decision to make. With new car prices at all-time highs and an overpriced even though limited used market, both options will translate into huge losses for the buyer. Perhaps, the most sensible tactic would be for buyers to analyze their requirements, consider the costs involved, and watch out for any changes in the current situation. These buyers face the reality that whether new cars or used vehicles, it is how to best manage the finances available against the car needs that is the primary problem in the car market.
