Sometimes, thanks to a combination of soaring used car values and special dealership and automaker incentives, the stars align and a fluky thing happens: Buying a new car is cheaper than a used version of the same model. It’s possible to find this scenario in the marketplace right now.
Late last fall, word spread that the end of the year would be an excellent time to buy a used car. Used car prices had just decreased over the course of several months, so the expert advice was to pull the trigger in the near future before, it was anticipated, prices started to rise again.
Surely, many consumers shrugged off the suggestion. Folks in the auto industry always seem to be saying that “Right Now!” is a terrific time to buy. After all, when’s the last time you heard an auto insider advise against buying a car?
Based on how used car prices have soared in early 2012—thanks, at least partly, due to rising gas prices—the experts apparently weren’t crying wolf in late 2011. In retrospect, it really was a good time to buy a used car.
Now and for some time to come, reports the Christian Science Monitor, anyone looking for a deal on a slightly used car is out of luck:
“We’re seeing extremely high levels of pricing pretty much across the board” for used cars, says Jessica Caldwell, senior analyst at Edmunds.com, an online automotive information company based in Santa Monica, Calif. “A lot of the time, if you’re going to buy a late-model used car, it doesn’t make financial sense.”
In the fall of 2010, Edmunds noted that in several cases, buying new was cheaper than buying used, especially after factoring in special financing promotions. Now, the same situation has popped up for buyers considering certain car models:
When Edmunds calculated the cost of a new CX-9 versus a one-year-old certified pre-owned model, it found that it was actually $1,020 less expensive to buy the new one once it figured in financing costs over the five-year life of the loan. A new Mazda2 Sport Hatchback was $480 cheaper than its one-year-old version.
For most models, it’s still cheaper to buy used. But the price difference between new and used is smaller than it once was. Over the last half-year or so, used cars have sold for roughly 12% less than their new counterparts, compared to a nearly 17% difference in 2009.
As cars grow increasingly capable of being driven 150K or 200K miles, old ideas about the pace of depreciation are disappearing, and used cars—especially those with low mileage—are likely to hold their value longer. At the same time, dealerships have to do what they can to incentivize customers to buy new cars, because they don’t want too many new models sitting on their lots month after month.