By on September 24, 2018

used cars used car lot

Ever since the end of the recession, new car prices have crept up steadily while used vehicle values remained comparably low. In fact, compact cars actually became less expensive between 2013 and 2017 as the crossover craze left a glut of small, economical vehicles that could be purchased for little more than a smile.

Unfortunately, the tide is turning. A sudden influx of end-of-lease vehicles was supposed to continue suppressing used vehicle prices for 2018. However, things have not played out that way. Despite there being so many gently used vehicles saturating dealer lots, average used-vehicle prices reached $20,153 in the second quarter of this year — making it the first time the market has ever broken the $20K threshold. According to research firm Edmunds, the 3.3-percent increase over 2017’s second quarter was also a record. 

Normally, a surplus of used vehicles helps keep prices down. But the popularity of utility vehicles and the proliferation of advanced tech has begun to seriously affect the secondary auto market. Five years ago, cars made up about 50 percent of United States’ new-car sales. But trucks and SUVs have since taken the majority of the industry’s volume, appearing on used lots en masse. That shift also forced up new vehicle transactions. In December, the average price of a new automobile in the U.S. reached $36,848 — an all-time high.

“Customers forget a new car is now more than $30,000 and they expect it to be $20,000,” Brian Allan, a senior director at Galpin Motors Inc. in Southern California, told The Wall Street Journal. “When people see the price has gone up, it is sticker shock, especially when people only buy a car every five to six years.”

That sticker shock forced some buyers back into the used market, pushing demand through the roof and allowing dealerships to charge more. This is further helped by dealerships having more access to off-lease crossovers and pickups, the kind of vehicles the average consumer is interested in buying.

From The Wall Street Journal:

As new car prices have climbed, auto lenders have kept monthly payments low by extending loan-repayment terms to five and six years and introducing [zero-percent] financing on loans that made buying new a more attractive deal.

But as interest rates rise and credit tightens, auto companies are pulling back on such sales incentives. The average monthly payment on a new car was $536 in August, up from $507 last year and $463 five years ago, according to Edmunds.com.

“In the past, I entertained new because you could get a [zero-percent] interest rate for 60 months,” said everyman Justin Scholz, who was recently considering a new Lexus RX Hybrid for $66,000. “New was a small premium compared to used. Now, the gap is much bigger.”

Scholz ultimately looked deeper into the used vehicle market, where he found a two-year-old version of the Lexus he wanted with only 30,000 miles on the odometer. It was more than $20,000 cheaper than the new vehicle, making the final decision relatively easy for him.

For the second quarter of 2018, the average transaction price for a three-year-old vehicle is $22,489. Meanwhile, the price of a new car was $35,828. The returns dealerships see on used vehicles has also gone up slightly, now sitting at 7 percent — over double the return of the average new-vehicle sale.

As for the future, demand isn’t expected to increase in the used market any time soon, but prices should continue to climb. Analyst projections for total used-vehicle sales for 2018 are about 38.5 million units, with no growth expected for 2019. However, as off-lease crossovers and trucks continue making their way back onto the second-hand market, used values aren’t likely to go down.

There’s also the matter of stagnating wages. Hourly income has increased as the economy turned around, but inflation appears to be outpacing income ever so slightly. Meanwhile, deprecation on the used market has slowed and anticipated demand has risen — helped in part by last year’s hurricanes.

While the price increase in the used market sounds unsettling, you’re still getting a sweet bargain by purchasing used. The gap between first- and second-hand vehicles continues to grow. Used values are simply reflecting the steadily inflating MSRP of showroom-fresh vehicles.

[Image: Steve Snodgrass/Flickr (CC BY 2.0)]

Get the latest TTAC e-Newsletter!

Recommended

62 Comments on “Damn: Used Cars Are Getting More Expensive...”


  • avatar

    “who was recently considering a new Lexus RX Hybrid for $66,000.”

    GOOD LORD.

    I’d never pay that much for an RX. That’s nuts.

    Overall, seems like to me you’d get more for your trade in a market where used cars are more expensive, so it roughly evens out? Or is that not how it works.

    • 0 avatar
      salmonmigration

      I’m with you. I guess a sucker’s born every minute. That car is gonna be worth $14k in 10 years.

    • 0 avatar
      kwong

      Back in 2011, I bought a 2007 Lexus Rx400h with 80K miles on it for $18K before tax and registration at a Jeep dealership in Scottsdale, Az. I got an amazing deal because Jeeps are so popular and hybrids are not in Arizona (where it floods and has wonderful areas to go off-road). I’m now eyeing a 2015 Rx450h for around $24K to mostly use as a rideshare vehicle. I have no interest in paying new car prices.

  • avatar
    28-Cars-Later

    Yet supply is increasing! Laws of supply and what again?

    • 0 avatar
      Kendahl

      I guess demand is increasing even faster.

      • 0 avatar
        28-Cars-Later

        This has been going on for 4+ years, its a combination of several things I think the chief being inflation and to an extent collusion among dealers and financing arms. If such a thing were published, I’d love to see figures on automobiles annually exported from CONUS.

        This cites an 800K figure in 2011 from Detroit Three which I assume is new product. USDM production in 2011 was around 10-11 million units.

        https://www.trade.gov/td/otm/assets/auto/ExportPaper2015.pdf

    • 0 avatar
      TMA1

      Reading between the lines, it seems that the prices of used vehicles hitting the lots may be higher because the vehicles themselves sold new as SUVs/CUVs, along with the price premium that entails.

      • 0 avatar
        28-Cars-Later

        Ah good point, but the spread on unloved stuff is still quite high. Few years back I saw 180K mile’d early 00s Camries still pulling 4K on the block – that’s insane. All wholesale is at least 30% overvalued and has been for years.

        • 0 avatar
          gtem

          How much of that particular Toyota tax is driven by African and Latin American exporters? They’ll happily take dented/crashed/hi-mile Toyota-anything, clean it up, “wash” the documents and resell it as a low-mile creampuff. One of the key elements to that strategy is those older Toyotas still had interiors (and mechanicals) that wore like iron. I’d even see that with 4Runners when my buddy was shopping in NYC. Carfax was showing some comically ambitious odometer turn-backs.

  • avatar
    CKNSLS Sierra SLT

    Two years ago I purchased a 2012 GMC Sierra SLT Crew Cab 4WD (fully loaded). Due to the coming tech of the new trucks (stop/start/motors where all but one or two cylinders could be cut off by the ECM, I decided to look at new trucks. I purchased a new 2018 Silverado LTZ with every option but Sunroof. The depreciation on the 2012 turned out to be $208.00 a month. Yep–$208.00 a month to drive a fully loaded VERY NICE truck. Unbelievable trade on the old truck.

    It should be noted the dealer sold my old truck the FIRST WEEKEND after he took it in trade.

  • avatar
    theBrandler

    I’m continually shocked by the price of cars, new and used. I’m trying to get a van for my family that’s less than a decade old. They are all well over $20K!!!! That puts the 5 year payments over $400 a month!!!! It’s just not doable. If I had an extra $400/m laying around anyway, I can’t say as spending on a van for 5 years is how I’d like to use it.

    • 0 avatar
      CKNSLS Sierra SLT

      theBrandler

      Affordability is becoming a big issue for many families. If you drive 12,000 miles or less a year-and you really want/need a new vehicle, leasing is a viable option.

    • 0 avatar
      gtem

      Basic-mid trim Grand Caravan has your name all over it. New ones can be found for $18k if you look, or get a 1 year old ex-rental SXT for the same price. Heck a 1 year old cloth-seat Pacifica is in range. A coworker bought a ’13 Grand Caravan with 100k miles for $7k 3 years ago as I recall, perfectly serviceable utilitarian family hauler.

      • 0 avatar
        cimarron typeR

        I’m starting to see a lot of older Grand Caravans used as work trucks,I just commented to myself that the one in front of me I435 needed some helper springs in a bad way. When you think about the cost of a new WT vs minivan purchased used, its fairly significant.

      • 0 avatar
        threeer

        Bought a 2016 earlier this year (with admittedly a tad high mileage count) for $16k…R/T model. With the only missing option being the rear-seat DVD player, it works very well as our long-distance dog hauler. She ain’t sexy, but with leather, heated seats (and steering wheel) and a subscription to Sirius/XM it’s a great cruiser. If we didn’t have the dogs, we could have gone cheaper with cloth, but then again, if not for the dogs, we likely wouldn’t have even considered a van!

        Interesting that used prices are going back up. My mom will be coming up on a replacement car in the next year or two for her 2012 Buick Verano (man, did that thing depreciate something fierce). Her heart has always been on a Mercedes-Benz, likely her last car purchase ever. She appears to be open to a lightly used variant, surprisingly so, since she’s only ever considered buying new. Wonder what a nice two-year old C-Class will go for in 2020…

      • 0 avatar
        volvoguyincanada

        That is if you want to drive your family around in an extremely unsafe car that will more than likely render the front seat passengers wheel-chair bound after an accident. Checkout the IIHS crash test results, typical for Dodge.

        • 0 avatar
          gtem

          Oh don’t be such a drama queen volvoguy. Up until the IIHS came up with yet another revision to their testing (after everyone started acing the existing one), the Grand Caravan was as solid as anything else. You realize they need to keep upping the ante to even stay relevant as an organization, right?

          • 0 avatar
            FWD Donuts

            Glad to see someone recognize the IIHS as the sham it really is. As for the Grand Caravan’s safety ratings — some people wear a belt and suspenders at the same time. Can’t be too careful, you know.

  • avatar
    sportyaccordy

    I’d be curious to see how it breaks out across segments. A lot of details can hide in an average. I’d wager sedans are still very affordable. Not hard to find NEW sedans for less than $22K.

    • 0 avatar
      TwoBelugas

      Not just new sedans, it’s not hard to find new Camry’s around 22k.

      That is truly mind boggling in terms how cheap it is, considering that base Camry’s were hovering around 18-20k even 15 years ago.

      I have heard so many people saying “I didn’t buy a _____ because it didn’t come with a handsfree tailgate opening” or “I went for the Platinum Triple Diamond trim for 15k more because lane assist was not standard on the Gold level”. I keep wondering how we all survived up until the late 2010’s…

      • 0 avatar
        sportyaccordy

        Well, personally, I won’t get a daily driver without Android Auto, and I’m very partial to panoramic sunroofs. I think I would really like a well implemented radar cruise control as well. I wouldn’t call these features totally useless. It’s not wrong for people to want a comfortable, safe, relaxing commute.

        • 0 avatar
          Kyree S. Williams

          Surprisingly, five of the eight cars I’ve owned (2011 X5, 2014 Jetta SportWagen, 2014 MKS, 2015 Golf SportWagen, 2015 Jeep Grand Cherokee) have had panoramic sunroofs, and all eight had a sunroof and leather or leather-like material. I fall on the fancy side of the spectrum, too.

          • 0 avatar
            TwoBelugas

            and that’s how they get you.

          • 0 avatar
            sportyaccordy

            @TwoBelugas, not sure why it’s a problem. After inflation these better equipped cars cost the same as their previous gen namesakes. And when you factor in that something like a Civic is an easy replacement for an old Accord, the price differential grows.

            I spend a lot more time in my car than on the internet talking about my car. So I’m not going to drive a cheapo bare bones ride for internet bad ass cred.

        • 0 avatar
          ddr777

          I drive a 2016 Accord EX, I don’t want a new car without apple CarPlay, keyless entry, push button start, adaptive cruise control and moon roof.
          It’s not easy to give up all that stuff once you get used to it.
          It’s not easy to find a 22k car with all these options.
          If you look 10 years ago or so, the difference in price between base model and top one, was not so great, today, top trim levels are so different from base that not only they cost sometimes 15k more, they also feel like a different car altogether.
          A base Camry is listed for about 23k, a top level with options is listed for 40k, same story with Accord and look at Ford F-150, you can buy 2 trucks for what the top model cost.

          • 0 avatar
            sportyaccordy

            You have to think outside the box. A new Civic EX with Honda Sensing has all that for $22K down here. I think you can even get an EX-T for about that much. Civic is a little narrower but has as much (if not more) legroom than your Accord as well.

  • avatar
    tylanner

    As long as the trade in price is reciprocated have at it.

    The massive “drive off the lot” depreciation costs have never made any sense…not that dealerships are known for rational ideas or fairness.

    But the lag between exploding used car prices and blue book trade in numbers is going to mean a lot of ripped off customers…

    • 0 avatar
      cdnsfan27

      Meh, you don’t want to pay us what we think our new car is worth so why should we pay you what you think your trade is worth. No ripoff, we just try to make a little profit on every deal.

      • 0 avatar
        CoastieLenn

        Dealerships make more money off the back end than they do off the price of the car. Extended warranties, tire nitrogen packages, paint protection packages, doc/admin fees, actual payments made (yes, a percentage goes to the dealer), loan payoff (yes, a stipend goes to the selling dealer). The dealer makes money off you hand over fist regardless of if you pay full fat for the car of get it for $2,000 less than what they pay for it anyway. Plus, *most* dealers don’t OWN the cars they sell, they’re paid for monthly just like you’re about to do. Having worked for Volvo and Dodge, they’re both done this way.

        Plus, the sales department doesn’t really rake in the money for the overall structure anyway, the service and parts department do more on that front.

  • avatar
    Sub-600

    People are financing pickups with over 100K miles for 60 months. Ouch!

    • 0 avatar
      CoastieLenn

      Unless you’re rather well off, you almost have to these days. Not too long ago, I was looking to get back into an F150. If your budget was at/under $25k and you needed 4 doors for kid hauling, good luck getting anything under 120k miles *or* under 6 years old.

      • 0 avatar
        Sub-600

        Yeah, $25K doesn’t go as far as it used to. I found the building permit for the house my father built in 1958…$12,200, lol. I paid twice that for my used Charger R/T two years ago, lol

      • 0 avatar
        turbo_awd

        Unless you *HAVE* to have a truck for work, lots of perfectly serviceable minivans for $25k with a lot less years and miles than that. And you’d be amazed at what they can haul.

        Our Town and Country can haul 4x8s – guy at Home Depot who helped me load up was amazed: I can’t fit those into my truck!!

      • 0 avatar
        JohnTaurus

        My dad bought a 2013 XLT 4×4 Super Crew EcoBoost with 101,000 miles for $16k. Granted, it was from his nephew, but he still could have found the same truck for under $20k from a private seller.

        No, it isn’t fully loaded, it has the small screen with basic Sync, cloth, etc. But its serving its purpose perfectly. Lots of the useful stuff is included, like integrated trailer brake controller, rear camera/sensors, etc. Its plenty nice for the money.

  • avatar
    cimarron typeR

    I love to browse autotrader, even if I’m not in the market and the sweet spot seems to be sedans of all classes-luxury, near-lux, econo. The price difference of an E350 vs ML class is fairly steep given the same platform.I’m sure someone with transaction /NADA can probably prove me wrong

    • 0 avatar
      Serpens

      They’re actually not on the same platform. The GLE (previously ML) and GLS (previously GL) are on their own platform that is considerably beefier and even has vestigial frame rails.

      • 0 avatar
        Kyree S. Williams

        Yep. My ’15 Grand Cherokee is on the same platform as the bigger Benz crossovers. It originated back when DaimlerChrysler was a thing, and I believe Jeep actually led the development of it. It’s also used by the Durango.

        However, the upcoming ’19 GLE will be on Mercedes-Benz modular CLAR alongside the new E-Class, so they’ll finally be platform-mates.

        Fun fact: the original ML was BOF. Not too many people know that.

    • 0 avatar
      CoastieLenn

      I also love to cruise AT. I love intentional masochism associated with looking at cars that I used to think I could afford some day (nothing unobtainable- a Fusion Titanium, for example) that even now making exponentially more money, I feel like are farther away from attainability.

    • 0 avatar
      stingray65

      Yes the price difference is big between sedan and CUV/SUV, but in snowy regions the premium sedans typically have AWD, so paying extra for the CUV is purely about style and higher seating position.

  • avatar
    dividebytube

    >>the average price of a new automobile in the U.S. reached $36,848

    I made decent $$$ but have never bought a new car. Throwing down anything north of $20k-ish would make me pause. My current ride, a 2014 V6 Mustang that I bought a few weeks ago with 26k miles, was only $16k. And that’s on the high end of the spectrum that I feel comfortable with.

    Because I have other interests – read expensive hobbies – that consume too much of my free cash. Paying $700/mo for a car isn’t going to happen. I know – I should really be leasing given that I only drive 7k miles a year.

  • avatar
    brandloyalty

    Is the $20,153 average price for used cars the transaction price or asking price? Probably it’s the price paid. It would be interesting to know the average asking price, for guidance when bargaining for a used car. My uninformed guideline is that used cars can be had for 75-80% of asking price.

  • avatar
    DenverMike

    The experts all insist if you didn’t buy “new”, you can’t afford it. What if Schulz can easily afford the new Lexus but cringed at the thought of $30,000 up in smoke in 2 years? Maybe Schulz can think for himself?

    Either way, there’s never been a better time in history to enjoy the used car/truck/pickup market. Over 100K miles? Who cares? It’ll probably go another 200K.

    The experts have to tell automakers what they want to hear, but deep down, automakers know. They know they have to scale-back reliability and longevity, while turning up the heat on complexity and engineered obsolescence.

    • 0 avatar
      TMA1

      Seems like the best way to do that is to just keep ladling on the tech.

      Sure, you could buy the 2-year old version, but did you notice the new one will nudge you back into your lane when you’re on the phone, or set off warning klaxons so you don’t have to turn your head anymore?

  • avatar
    cimarron typeR

    With so many resources available to buy used cars , it’s hard not to buy a used car. With CPO databases you can cherry pick CPO cars as easily as buying a new car.We couldn’t find a new car with the options we wanted in the color we wanted so we decided to buy a CPO used one with everything we wanted and got a date trip to CHI to boot.

    Honestly , ABS and airbags and OBD are the only gamechangers as far as I’m concerned.

  • avatar
    ACCvsBig10

    I wonder if all the flooding and damange from the hurricanes the past few years is having the greatest affect?

  • avatar
    drivelikejehu

    I’d been thinking for a while that I’d get a CPO 5-series to replace my 2006 325Ci. Last year around this time there were pretty good deals but I didn’t pull the trigger. This year I was ready to do it and was shocked by how much higher prices seem – for a non-crossover/SUV with scary future maintenance obligations.

    I wound up leasing a new 2018 last week, which was rather dubious from a financial standpoint, but at least I didn’t feel ripped off.

    • 0 avatar
      jkross22

      If you must have a BMW, you made the right call. You DO NOT want a CPO BMW. At one point, their CPO designation meant the car actually got inspected/refurbished/repaired. Now it appears it’s a checklist where boxes are ticked without any meaningful inspection.

      My experience is that CPO from them no longer mean much of anything other than marketing.

    • 0 avatar
      SaulTigh

      At least the dealership experience is very nice and they do truly take care of everything. it’s your money and you can’t take it with you.

      I might do it again some day myself, but for a bit I’m going to drive something old and paid for.

  • avatar
    FWD Donuts

    People are paying more for cars because most don’t have the nuts to haggle anymore. Was in the market for a Fusion Titanium in 2014:

    • In Silicon Valley, home to a bazillion overpaid keyboard peckers who can’t even muster up the courage to look you in the eye, my friendly local Ford dealer basically wanted sticker — while presenting the “discount” from the rebates as the greatest gift in the history of mankind — while telling me I wasn’t eligible for their lease conquest rebate. Went round and round with their idiot sales manager — and couldn’t get anywhere with him.

    • Got online and found the same car down in San Bernardino — which is 90 miles east of Los Angeles. A hard scrabble area that’s kind of an industrial cat box. Sent one email to their internet sales department — ONE — and instantly saved five grand. Discussed rebates — another couple of grand.

    Sooooo, in Silicon Valley a car with a $36K sticker goes for $34K with rebates. In San Berdoo, $28K. What was funny is the Silicon Valley dealer called to follow up while I was driving back in the new car.

    • 0 avatar
      The Ghost of Buckshot Jones

      It’s got nothing to do with “nuts”, it’s not wanting to waste the time. The internet has been a staple of car sales now for over 20 years. In 10 minutes, you can get a glance of the entire market for the car you’re looking for, see the prices, average sales transaction, and get an idea of what the margins are on it, how much they’re selling for at auction, etc. The dealers know that too. If you glance at a dealer and see he’s an easy 7-8k over market, you’re not even going to bother talking to them, because you know they don’t care about moving it. Any other place you’re probably looking at $800-$1000 bucks of wiggle room tops, and frankly, I’m not wasting any more time than a single email at that level of chump change. “haggling” over 500 bucks on a high ticket purchase is embarrassing.

  • avatar
    TimK

    Take away the low cost financing and used car prices would collapse to rational levels again. The situation with cars these days is almost as ridiculous as commercial real estate. Nobody pays off their loans, they just get rolled into the next one.

  • avatar
    Lightspeed

    4Runners alone are skewing the market, the older the more miles, the more they want.

  • avatar
    87 Morgan

    I think an argument can be made that natural disaster is helping in part to either increase or at the least maintain the current used vehicle pricing. Anymore it seems we can rely on some area of the country being completely wiped out with flooding and what not. These events put people back into the market prematurely with little time to shop, while also requiring the local dealers to essentially do the same thing in bulk on the wholesale market.

    These events are a boon for the poorly run stores that have stale or aged inventory to off load front row ready product to someone who is desperate.

  • avatar

    This question also depends on your personal use curve. There are folks who buy as fashion then at year four get bored. If you are not able to fix a few simple things the perceived cost goes way up. I keep forever and believe buy once cry once. My new BMW lasted 13 years. My Acura is 11 and still going. I will be replacing the Caddy shortly with another new car because the Cad is falling apart. I bought it used but it has not been a bargain. If you buy and keep a new car it makes sense

    • 0 avatar
      The Ghost of Buckshot Jones

      You just described most enthusiasts. I, and most everyone else I know get bored after 3-4 years with a car unless you’re putting serious work into it or it’s a rare, special piece. $5-7k worth of required and scheduled maintenance is a tough sell when you’re already tired of the car. Hence people swap out to a new shiny toy.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • indi500fan: If you take resale value into account, I’d bet the Ford isn’t even close on the financials...
  • TrailerTrash: tomLU86 how you struggle with data. we can discuss the real data all night long, and it would take that...
  • indi500fan: Tweater said that particular Tesla was trying to emulate the SpaceX docking with the ISS.
  • TrailerTrash: exactly. and he DID dive in bringing up his white privilege and how he is uncomfortable in his own...
  • Lou_BC: @TrailerTrash – The family of the deceased released the results of the one they had performed. They...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber