Tight New-Car Supply Leads to Crazy Used-Car Prices

Tim Healey
by Tim Healey
tight new car supply leads to crazy used car prices

According to car-shopping site iSeeCars, there are currently 16 models that will cost you more used than new.

16!

That is, how shall we say, unusual. And, obviously, not good news for the used-car shopper.

It’s all part of a broader trend — in June, according to iSeeCars, the average lightly used car cost 3.1 percent less than the price of its equivalent new car. In November 2020, the difference was 10.8 percent.

“Used car prices have risen overall, and prices have dramatically increased for certain in-demand models that may be harder to find on new car lots,” iSeeCars executive analyst Karl Brauer is quoted as saying in the article. “Dealers may think used car buyers are willing to pay more for the instant gratification of a lightly-used vehicle they can drive right off the lot rather than waiting for a new one.”

Unsurprisingly, the chip shortage that has led to tight new-car supply appears to be at least partly to blame.

The list of the 16 vehicles is led by the Kia Telluride, which can command an average of 8.1 percent over new, at around $47K. The average new price on Telluride is about $44K.

The other vehicles on the list include the GMC Sierra, Toyota Tacoma, Mercedes-Benz G-Class, Toyota RAV4 Hybrid, Toyota Tundra, Dodge Challenger, Toyota 4Runner, Hyundai Palisade, Tesla Model 3, Honda Civic, Dodge Charger, Honda Odyssey, Kia Rio, Subaru Crosstrek, and Subaru WRX.

All but the G-Class are considered “mainstream” models, and while some of those vehicles can get pricey, only the G and the Sierra are truly considered luxury models. We’ll also note the Civic is about to change over to the 2022 model year, so it’s possible that Civics from the outgoing generation are in short supply regardless of the chip situation.

We should also note that the Telluride has been a hot seller since launch and given that the launch was in 2019, there likely aren’t that many used ones around. Brauer further notes that the RAV4 Hybrid might be popular due to high gas prices and that the Tesla makes the list likely as a way for Tesla buyers to avoid waiting weeks for a new car.

Most of the models on the list are relatively popular, too. The exceptions would be the G-Class (a luxury toy for the Beverly Hills set), the Tundra (oft-ignored in favor of the competition), the aging 4Runner, the sometimes forgotten Rio, and the long-in-the-tooth WRX.

This makes obvious sense — if the new-car supply of desirable models is tight, buyers will seek out lightly used models, and that desirability will lead to increased prices.

However, it also flips conventional wisdom on its head. Until recently, buying a well-maintained used car was often seen as a way to get an almost-new vehicle at a lower price without taking the depreciation hit.

Now, though, the combination of popularity and restricted new-car supply has sent the market haywire, at least temporarily. Forecasters do see a return to normalcy once the chip shortage is sorted out. Once models like the Telluride and Palisade are available new from the factory in large numbers, those who’d rather not settle on a used vehicle will go back to buying new. That will make lightly-used cars less desirable, and bring prices down.

Insanity, thankfully, can be temporary.

[Image: Kia]

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  • 28-Cars-Later 28-Cars-Later on Jul 12, 2021

    "The list of the 16 vehicles is led by the Kia Telluride, which can command an average of 8.1 percent over new, at around $47K. The average new price on Telluride is about $44K." Christ on a bike its a K.I.A. not a Lexus. "Forecasters do see a return to normalcy once the chip shortage is sorted out." So... 2023 then? "That will make lightly-used cars less desirable, and bring prices down." Oh so, less than new ones perhaps? Well if we're lucky. The Fed inflation will permanently redefine the new car/used car valuation relationship, it remains to be seen how EV will further exacerbate this.

    • See 2 previous
    • Bd2 Bd2 on Jul 14, 2021

      @dal20402 Not disagreeing that those looking for a bit more in driving dynamics will opt for the MDX (esp. the new model), but the majority of 3-row CUV buyers have handling a good bit down on their priorities list. Acura had big incentives on the MDX for several years and still had a glut of the old model when the new one launched. There were prospective buyers who wanted the Telluride SXP, but the MDX came into play (with its discounts and the mark-ups on the Telluride, the MDX ended up being a good bit less). But for 3-row CUV buyers looking for more driving dynamics, the big threat to the MDX will be the upcoming RWD CX-9 with a straight 6. And yeah, Toyota took the cheap way out with the RX-L, but Lexus supposedly will get a proper 3-row CUV based on the next Crown (which is turning into a CUV). Problem with these FWD lux 3-row CUVs is that the interiors of the Telluride SXP and even more so, the Palisade Calligraphy is closer to them than they are to something like the GV80.

  • Art Vandelay Art Vandelay on Jul 12, 2021

    There is no inflation. Move along.

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