For years and years, the economics of the car market seemed simple and straightforward: buying a new car was the more expensive option, and buying a used car was much, much cheaper. For many high end brands, this still reigns true. However, with country-wide inflation peaking past the 7% mark this past year and supply chain issues progressively pausing the production of vehicles, the car market is fast changing.
Is it worth it?
In today’s economy, it’s important to price out your options when comparing vehicles to one another for purchase, especially “new” vs. “used.” For clarification, a “new” car is typically a car that is driven off the lot with very little miles. A new car usually has less than a couple thousand miles on it, all the way down to literally zero. A “used” car is a car that is pre-owened by another person; it’s been driven a certain amount of miles, and it’s experienced a normal amount of wear and tear.
For most car buyers, the journey to choosing between new and used has been predominantly led by pricing and budget. If an individual wants to spend more money, then a new car might be a possibility. If an individual is more concerned about saving money, a used car is more likely a viable option. Simple, right?
Not so simple
Nowadays, it’s a bit more complicated. Around the time that COVID-19 swept the world and the USA’s inflation and supply chain issues became an ongoing problem, the car market, similar to the housing market, saw a hike in its pricing. Because new cars are more difficult to produce due to lagging lead times in certain car parts (most notably, computer chips), the used car market is as popular as ever.
For example, a 2015 Jeep Wrangler with 40,000 miles on it would sell for the same price, if not more, than it did back in 2015. That means, essentially, the person who owned that 2015 Jeep Wrangler was able to drive the car for six years for free. A purchase for $25,000 back in 2015, and a sale for $25,000 in 2022. Crazy right?
Used vehicles have increased in value tremendously. According to Car and Driver, the average used car costs around 35% more today than it did at this time last year. According to Kelly Blue Book, used cars under $10,000 are the hardest to find due to the increase in prices nationwide. For example, a car that might have cost $7,000 two years ago might now cost upwards of $11,000. That’s a very big increase in margins, and something to take into serious consideration when deciding to go new vs. used. For many people, the significant increase in used car pricing might lead them to buy new for not much more money.
Budget reigns supreme when buying new
No matter the reasons behind the increase in the prices of cars today, your budget will almost always certainly guide you in the right direction. If you are able to spend $50,000 on a brand new Toyota Highlander because it fits your budget and you’re looking for enough space for five people, then go for it. If not, check around the used car market. Look through online platforms that sell used vehicles, compare similar cars, their pricing, their past ownership, and their mileage, and make a decision from there.