Many best-selling cars in the US are still cheaper to buy new than used

In the ‘weird, but true’ category, car consumers face a unique but pricey problem when buying used cars – it’s cheaper to buy the same model new than used.

That’s the outlook from a new study by Jerrya savings app for car insurance.

According to the report, despite falling used car prices, lightly used versions of seven of the 10 best-selling vehicles in America are still worth more than the sticker price on comparable new 2022 models.

Among the 10 best-selling vehicles in the US, the following lightly used 2021 models are worth more than the sticker prices on new 2022 models:

Toyota RAV4 ($5,900+)
Honda Civic ($5,300+)
Honda CR-V ($3,800+)
Toyota Camry ($3,200+)
Nissan Rogue ($3,100+)
Toyota Highlander ($210+)
Ford F Series ($100+).

That’s just under nine out of ten bestsellers that Jerry tracked in June, “indicating that the worst may be over, even if the market is still far from normal,” the report said.

In addition, three of the top five best-selling EVs from 2021 have now been used lighter than the sticker price on comparable new 2022 models. These models include the Volkswagen ID.4 ($6,300 more), Tesla Model 3 ($5,200) and Ford Mustang Mach-E ($5,200).

Here are the vehicle prices that look like this

Overall, the pace of annual used car price increases has slowed this year, which is good news for car buyers. According to the Bureau of Labor Statistics, used car prices rose 6.6% in July from the previous year, down from a massive 41% price increase in February 2022.

So why flip the price between new and used cars? As usual, delays in building new vehicles are a major problem for buyers.

“Due to the chip shortage and other disruptions, many automakers, including Toyota and Honda, have cut production despite strong demand, resulting in fewer new cars on dealer lots and longer wait times for delivery,” analysts noted in the Jerry report. “This has pushed up the prices of both new and used cars.”

According to Edmunds, 82% of people who bought a new car in January 2022 paid more than the MSRP, compared to just 2.8% a year earlier. “Others turned to the used car market — and many are paying more than the list price of a new one,” the study added.

With high demand and low inventory in play, don’t expect much to change in the new and used car markets anytime soon.

“Manufacturers stopped producing cars when the world came to a standstill because of Covid,” said Mano Yeghikian, chief executive of RDB LA and RDB Car Club. “This massive shutdown led to an increase in used car prices. Like all industries, low production leads to high demands, which leads to a huge price increase.”

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For the few new cars that dealers had in stock, demand was so high that some dealers turned to what the auto industry calls “ADM” (Additional Dealer Markup).

“These fees ranged from several hundred to tens of thousands of dollars, depending on the vehicles and demand,” said Richard Reina, director of product training at CARiD.coman aftermarket car dealer.

The end result? A gently used car one or two years old was worth more than its original suggested retail price (manufacturer’s suggested price).

“For example, if a 2021 model year car was purchased new for $30,000, that same 2022 model vehicle, if it could be found in stock on a dealer’s lot, would fetch $35,000 with an ADM of $5,000,” explained Reina out. “A desperate buyer faced with the choice of paying $5,000 over the sticker price or buying a lightly used car for $31,000 ($1,000 over the original new price) might choose the used car.”

Even more problematic is the buyer who can’t find his new car of choice at any price and who has no choice but to buy second-hand. “Sellers have recognized this and have increased their asking prices accordingly,” Reina added.

The good news is that it is “definitely” a temporary situation, Yeghikian said.

“We will see a huge drop in used cars this year and an introduction of brand new cars next year,” he added. “The supply chains have ramped up their engine and once they are back in stock we will see a drop in prices across the board, especially for used cars”

So if you are looking for a vehicle, Yeghikian suggests waiting a few months. “Even if you have the option to buy out your lease now, that’s the best time to do it,” he said.

Three tips for anxious buyers

Now if you need to pull the trigger on a new or used vehicle, take these tips with you.

Do you really need the vehicle? New car consumers should ask themselves, “How badly do I need a replacement car right now?”

“If your car has just been a total loss, replacement is of course justified,” said Reina. “However, if your current car is in good condition and can be kept roadworthy with only routine maintenance, weigh your options and consider keeping their current vehicle for another year or two.”

To be flexible. If your mind is set on ‘Brand X’, rethink that and broaden your store search to include a wider variety of makes and models.

“The more open-minded a shopper is, the more likely they are to find an acceptable vehicle at a dealership,” Reina said. “You can also order a vehicle instead of trying to buy one from a dealer’s existing stock. If you can wait four to eight weeks, special orders allow you to specify the car with only the options you want.

“Ordering one that is built for you also gives you more bargaining power with the dealer over price,” he added.

Take precautions with used vehicles. When buying a used car, consider all options.

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