By on July 9, 2021

Kia

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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18 Comments on “Tight New-Car Supply Leads to Crazy Used-Car Prices...”


  • avatar
    jrasero23

    The used car market is a lot like the housing market, yes you can get a premium for your used car or house and rates are great but finding that replacement house or car can be very hard. Frankly this is a great time to break your lease or if you need a car to lease.

    We bought my wife’s 2020 Acura ILX Premium A-Spec during the pandemic May 2020. I looked to see what our car would be worth in March 2021 and I was showing maybe $1K+ worth of equity. Fast forward now and we recently traded in the car to a non Acura dealer for $5500+ worth of equity.

    Point being if you can find a replacement car, yes trade your car asap since I believe used car values will start to crater.

  • avatar
    SCE to AUX

    Fascinating that the Rio and Telluride make the same list.

    I would never pay more for used than new unless there was some sort of apocalypse. Anyone taking a loan for an overpriced used car will face sadness if they want to trade it in a couple years, when they discover they’re thousands of dollars upside down.

    But hey, the Finance manager can work out a deal just for you!

  • avatar
    jack4x

    No doubt values are high, but how high is still a matter of some question and I’ve never seen less consistency.

    For example, Carvana is willing to pay me $50K for my truck (up from $43K last month) because they claim it’s “outside their sweet spot” whatever that means. NADA says it’s worth $73,700 on clean trade in. I’m sure the truth is somewhere in the middle, but it’s sure hard to get a sense of what’s real and what isn’t right now.

    • 0 avatar
      CKNSLS Sierra SLT

      jack4x-
      Translated that means they have to ship it somewhere else.

    • 0 avatar
      JRobUSC

      NADA has no bearing on actual transactional value. The lenders use it to determine loans, that’s all, no one else bases anything on NADA (which is now called JDPower, btw). Up until recently NADA was typically well behind wholesale or retail pricing. Now suddenly it’s thousands higher than both. Great for financing with less money down, but not indicative of anything else. If you want to know what your truck is actually worth to sell or trade, look at MMR. Actual values, on actual vehicles, that were actually sold by banks and dealers to each other. Of course, without a dealers license you can’t actually buy or sell through Manheim. The highest wholesale figures you’ll typically ever get come from Carvana and Vroom, who are buying market share by drastically overpaying to get cars.

  • avatar
    deanst

    Theoretically, you could trade in an expensive overpriced vehicle for a cheaper less overpriced vehicle and come out ahead. But not many people ever downsize their vehicle choice.

    • 0 avatar
      ajla

      I ran the numbers on selling my Stinger and doing a 2-year Forte lease. Although I think I’d come out ahead, it wasn’t by much and I’d have to spend 2 years with a 145hp car.

  • avatar
    multicam

    Vroom offered me $1,000 more than I paid for my Wrangler. It’s a 2019 model with 32k miles on it. But I’m keeping it because I’d have to replace it and I’m quite happy with it.

  • avatar

    Living in America I do not see how it is better to buy a used car over a new car for the same or higher price.

    • 0 avatar
      Art Vandelay

      I’m waiting for all the “I only buy new because I’m smart…let some sucker take the appreciation hit” posts.

    • 0 avatar
      DC Bruce

      It isn’t. I suspect we’re talking about averages, not individual cases in the same geographic market. That said, the last time I bought a new car, 2008(!), I did notice that the car I bought was only about $1,000 more than the same model used (Honda Pilot). I think there were a couple of reasons for that: (1) that year was the last of the first-generation Pilots; a new and better (?) Pilot was due out later in the year, (2) I bought in October, which is late in the year and (3) the used prices I was seeing were “before negotiation” (in other words, before I told the seller I could get a new version of the same vehicle for only $1,000 more).

      To be sure, there are certain moments of irrationality in the market, which smart traders exploit, e.g. the Telluride is a good value at $50K, but faces some stiff competition at the $60K that they are supposedly trading for, new.

  • avatar
    boowiebear

    I bought a new Tesla Model 3 last month and noticed the crazy used car prices. The Model 3 specifically has the lowest depreciation right now so I felt safe buying new. First time ever in my life. I sold my Hyundai Genesis 2016 for $2k more than it was selling for 2 years ago! I figured no time like now. Crazy times.

  • avatar
    DenverMike

    It is something to snivel at, but just pay it, move on.

    What ever I paid last year for fuel, I paid that already this year. I’m paying over 3X more for lumber and most build-related goods are up 30%.

  • avatar
    28-Cars-Later

    “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.

    • 0 avatar
      bd2

      The Telluride is a good bit better than the newer Highlander, much less the RX-L (with its cheap arse addition of a 3rd row) which is based on the old Highlander.

      Got a 97 score from Consumer Reports which is one of the highest scores any vehicle has gotten from CR and won every major automotive award, including World CotY.

      Review after review have stated why get the RX-L, MDX, XT6 (and other FWD “luxury” 3-row CUVs) when one can get the Telluride that’s better.

      In certain markets dealerships are still up-charging as much as $15k for the top SXP trim.

      A big reason why used prices are higher is because many buyers are ordering the SXP from a dealership that sells at MSRP (plus cost of shipping) and are willing to wait for as much as a year.

      If you’re not willing to wait, then will have to pay the market price.

      • 0 avatar
        dal20402

        I agree the Telluride is more appealing than the gas Highlander, although it’s aiming at a different buyer from the hybrid one. But I’d take an MDX over a Telluride every time and twice on Sunday. It’s just nicer to drive, between lighter weight and SH-AWD.

        The RXL is compromised badly by its too-short wheelbase. Had Lexus done the right thing and extended the wheelbase to create it, it would also be competitive with the Telluride, albeit with different strengths and weaknesses. The standard RX is quieter and smoother than the Telluride and has nicer materials, especially with the Luxury Package option. But obviously it doesn’t do as well at features for money and it’s not the flashy new kid on the block.

        • 0 avatar
          bd2

          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.

  • avatar
    Art Vandelay

    There is no inflation. Move along.

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