Home » The Price Gap Between New Cars And Used Cars Is Higher Than Ever

The Price Gap Between New Cars And Used Cars Is Higher Than Ever

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Almost every major economic indicator in the United States points towards the improbable “soft landing” scenario wherein we get out of the pandemic and post-pandemic inflation scare mostly unscathed. Employment is strong. GDP is solid. And even inflation is mostly coming down. However, a quirk in how the pandemic impacted car sales means that the gap between what a new car costs and what a used car costs is greater than it’s ever been.

It’s a spooky Halloween edition of The Morning Dump if you’re in the market for a new car and haven’t been paying attention for the last few years. If you’re an investor in Carvana you’ll feel a little differently, as the company, once marked for dead, is making insane money.

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There’s no country that looms, Bela Lugosi-like, over Europe quite like China. Now that a bunch of tariffs are about to go into effect the Chinese government is showing its teeth and threatening investment in countries that voted against them. Finally: Is that a g-g-g-ghost? No, Scooby, that’s just the Q3 Stellantis earnings report.

The Gap Between New And Used Cars Is Now $20,365 On Average

Dealership Lot
Source: Depositphotos.com

For more than 20 years, Edmunds has been tracking the average price of new cars and used cars. There are always gaps, of course, but they tend to stay fairly consistent over time as prices usually move together (cheaper new cars usually put downward pressure on used cars).

Here’s a chart showing the last few quarters:

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Price Difference Gap
Source: Edmunds

The old patterns are familiar to anyone who regularly reads this website. Prices of new and used cars were slowly appreciating until the pandemic and then they both shot up as inventory suddenly vanished. Used cars, in particular, became outrageously priced, jumping from around $20k to $30k in just two years. New car pricing obviously also shot up at the same time.

So what happened? Good quality used cars are in short supply and will be for the foreseeable future, but prices have retreated a little bit. Here’s how Edmunds explains it:

Used vehicle prices dropped by 6.2% year over year to $27,177 on average, down from $28,960 in Q3 2023. The falling values are joined by steadiness in turnover at dealerships: The average days to turn — the number of days a vehicle sits on a dealer lot before a sale — for used vehicles was 36 days, up one day from a year prior.

Why are new car prices still so high? I know I keep tapping the sign marked “trimflation” and I apologize for being repetitive, but automakers used the chip shortage to their advantage and focused on making higher-trim vehicles and went on an MSRP-raising spree. Looking at recent vehicle announcements it seems like automakers are being cautious with their increases, and some EV prices are still coming down. With incentives up this is stalling price increases, which isn’t the same as prices going down.

Used car prices are generally more variable and can trend up or down faster than new cars. Plus, some automakers are just less willing to discount until they absolutely, positively have to, which is what happened with Stellantis up until recently. Eventually, incentive spending and product mix should bring the average price of new cars back to a normal level.

In the interim, Edmunds also found that people who purchased cars in the pre-pandemic period are simply not prepared for how expensive new cars are now:

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[R]eal-world transaction data from Edmunds shows that even with the best of plans, many who say they prefer a new vehicle or are open to both options depending on the deal are likely to end up with a used car unless they adjust their expectations. At a minimum, 14% of “New vehicle” respondents and 38% of “Depends on the price/deal” respondents will end up with a used vehicle as there are no new vehicles within the $20,000-or-less tier that these respondents said they would be shopping.

Even when consumers are decided on the new vs. used vehicle shopping choice, their assumptions about what their monthly payments will look like do not match up to today’s reality. For respondents that indicated either “Used vehicle” or “Depends on the price/deal,” many are envisioning a monthly payment that is far more reminiscent of 2019 figures: 56% said they intend to make payments of $300 or less. The average monthly payment for a used vehicle in Q3 2024 was $548, compared to $413 in Q3 2019.

I still think this means there’s an opportunity for an automaker to sell a Dacia-like crossover that looks good and doesn’t cost that much. The Chevy Trax is close.

Carvana: We Lived, Bitch

Carvana Vending Machine
Photo credit: Carvana

We get things wrong. I get things wrong. A bunch of bad news and questionable loans led to headlines like “What Are The Best Cars To Cheaply Buy From Carvana If It Implodes?” and “How To Repurpose Carvana Vending Machine Towers To Build An Automotive Paradise” around here at the end of 2022.

Carvana was on the brink of collapse, and has since gone completely in the opposite direction. The company just reported its Q3 earnings, and the used car retailer did better than anyone imagined according to CNBC:

Carvana on Wednesday raised its 2024 earnings guidance after the online used-car retailer significantly topped Wall Street’s third-quarter expectations.

Here’s how the company performed in the third quarter, compared with average estimates compiled by LSEG:

  • Earnings per share: 64 cents vs. 25 cents expected
    Revenue: $3.65 billion vs. $3.45 billion expected
    The company’s stock rose roughly 20% in after-hours trading Wednesday.

For 2024 guidance, Carvana said its adjusted earnings before interest, taxes, depreciation and amortization would be “significantly above the high end” of its previous target of $1 billion to $1.2 billion. The company reported $339 million in adjusted EBITDA last year.

If you’d have purchased Carvana stock when those headlines went up it would have been around $5 a share. It’s now trading at $250, so you’d have made 50x your investment in under two years. Never take stock advice from bloggers!

Stellantis Revenues Drop 27% In Q3

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Photo: Stellantis

Struggling global automaker Stellantis posted net revenues of $36 billion in Q3 of 2024, which is somehow worse than the already low $39 billion analysts expected. That’s a lot of E-Rifters.

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Things are bad in Europe, and they’re not great in China, though Stellantis isn’t a big player there yet. What’s the biggest issue? North America.

Per Bloomberg:

Stellantis is unique among European automakers in that its issues are most acute in North America. In September, leaders of the company’s US dealer network accused Tavares of damaging brands including Jeep, Dodge, Ram and Chrysler, and urged him to spend more money to clear inventory off their lots.

I don’t see that getting better anytime soon, though it would be nice if Stellantis had a great plan for North America that I could understand and articulate. Convince me, Carlos! Oh, side note: UAW President Shawn Fain just said that if his union has to strike it will “cripple” Stellantis, which isn’t hard to believe.

China Tells Car Companies To Slow Investments In Countries That Voted For Tariffs

Byd Goodwood Robot 1

The tariffs against Chinese automakers accused of unfairly subsidizing domestic EV production went into effect last night and, as predicted, China isn’t taking it lying down. The countries that voted for the tariffs generally have some kind of domestic car industry they want to protect or aren’t as reliant on Chinese investment. France, Poland, and Italy were the big countries in support of the move while Germany, which needs China, opposed the move. Many other countries abstained.

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How is the Chinese government responding?

From Reuters:

Chinese automakers including BYD, SAIC, and Geely were told at a meeting held by the Ministry of Commerce on Oct. 10 that they should pause their heavy asset investment plans such as factories in countries that backed the proposal, said the people.

They declined to be named, as the meeting was not public.

Several foreign automakers also attended the meeting, where the participants were told to be prudent about their investments in countries that abstained from voting and were “encouraged” to invest in those that voted against the tariffs, the people said.

This was probably inevitable and, frankly, a spending war is way better than an actual one.

What I’m Listening To While Writing TMD

Oingo Boing’s “Dead Man’s Party” is on the Apple “Halloween Party” mix and my daughter surprisingly digs it so I’ve listened to this song 900 times this month. It still slaps. Also, based on the video, the song was used in the Rodney Dangerfield vehicle Back To School.

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The Big Question

What are your feelings on car pricing right now? How long before new car prices become somewhat reasonable again?

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Cheap Bastard
Cheap Bastard
2 minutes ago

“Oingo Boing’s “Dead Man’s Party” is on the Apple “Halloween Party” mix and my daughter surprisingly digs it so I’ve listened to this song 900 times this month”

If its not already in your mix may I suggest adding Toco Coleco’s “I Eat Cannibals”:

https://m.youtube.com/watch?v=kZnl0C-apf0

Bleeder
Bleeder
6 minutes ago

Never take stock advice from bloggers!

Doubly so if it comes from stock advice bloggers!

ES
ES
7 minutes ago

That Edmunds graph wasn’t terribly precise, but it looks like in 2024, as in 2019, the avg. used car price is between 55%-60% of the avg. new car price. The gap is bigger in nominal dollars because the nominal costs are greater. As a percentage, the gap contracted in ’21-22, when the used car lots were picked clean. Without a wider timespan to judge, it’s impossible to certainly state, but maybe 57% is answer, not 42.

Horizontally Opposed
Horizontally Opposed
18 minutes ago

Duster! my dad has 2021 RWD with the 2.0 engine and I took it to ravines where my 2007 FJ cruiser struggled mightily, because of its insane weight. The Duster didn’t even break a sweat, on road tires – a real lightweight goat. And the thing sips gas, and has a refreshingly head unit with monochrome pixel display which also does bluetooth. Manual of course – all for a song if a price. Cmon Renault – give the US market the lesson you failed with the DS.

Tim Beamer
Tim Beamer
31 minutes ago

I actually bought my used 2018 Cayman from Carvana and traded my 2017 Golf R for it. Prices were reasonable on both sides of the equation and the experience made me wonder if I’ll ever go back to shopping at a dealership for a used car again. After doing everything online, the actual amount of time in the Carvana showroom was a tiny fraction of the amount of time I spent in a Ford dealer to buy my Bronco. Best part of the Carvana experience? I never heard anyone say, “I’ll have to talk to my manager…”

Lotsofchops
Lotsofchops
39 minutes ago

Carvana can make Stock Go Up as much as they want, I don’t think I could ever trust them as a company after all the shady crap they got up to.

MrLM002
MrLM002
51 minutes ago

What are your feelings on car pricing right now? How long before new car prices become somewhat reasonable again?

It’ll be the 08 Housing Crisis all over again. Domestic automakers will get bailed out because they can’t sell their overly expensive automobiles rotting on the lots, leasing and auto loans will get much much much more selective in who they approve, and it’ll all happen again.

I think people really don’t realize how fragile our economic system is with how reliant on loans and insurance it is. Wanna buy a new car? Loan. Wanna buy a used car? Loan. Wanna buy a house? Loan. Hell, you got payment plans for Dominos pizza FFS.

It’s disgusting.

MegaVan
MegaVan
1 hour ago

If the spread was not so large then you couldn’t write articles about cars depreciating at $73.46 / mile (exaggeration). So at least you can generate some ad revenue from it (serious).

Fuzzyweis
Fuzzyweis
1 hour ago

I’ve only ever bought a new car once, a 1996 Dodge Neon coupe, stick shift, no AC, crank windows, keys didn’t even have a chip so I could get the cool glow in the dark ones cut without any issue.(an oem offering).

So probably not the best to say but new car prices never seem reasonable, especially when they depreciate so much as soon as it’s bought. I know cars are supposed to be a depreciating asset, but 20% in the first year? That’s crazy.

Also booo on the halloween song pick! Dead Man’s Party should be for manana, Dia De Muertos! Today should be Thriller WITH the Vincent Price rap.(all other versions should be banned from the radio).

Other acceptable songs:
Monster Mash – Bobby Picket
Werewolves of London – Warren Zevon
Monster by Rihanna
Zombie by Cranberries
Frankenstein – Edgar Winters Group
Black Magic Woman – Santana
Witchcraft – Frank Sinatra
Spooky – Classics IV
I Put a Spell on You – Screamin’ Jay Hawkins
Season of the Witch – Donavan
Witchy Woman – The Eagles
Ghostbusters – Ray Parker

Last edited 1 hour ago by Fuzzyweis
Parsko
Parsko
59 minutes ago
Reply to  Fuzzyweis

Agreed on the song gripe!

Spikedlemon
Spikedlemon
1 hour ago

Pre-pandemic (mine) and mid-pandemic (the other half’s) car buyer here.

I felt taken advantage of mid-pandemic, even through I didn’t get hit by insane markups (just the regular MSRP kind). Now that supply is unconstrained, I still feel like the MSRP is out to take advantage of you.

I joke (sadly) that I’ll never buy another new vehicle for the price I paid in 2019 for mine; to buy the current version of mine is >50% increase over my OTD costs (not to mention interest rates on top of that).

4jim
4jim
1 hour ago

For some a cheap new car (they are rare) are, in the long run, cheaper and easier on their lives than a used fancy car with a high interest rate and a transmission or engine that will soon blow. Regular car payments on a small car that will get you to work every day can be better than the used car that has expensive repairs at unpredictable intervals and leaves one not able to get to work. Not everyone is a sadetree mechanic with space, tools, repair knowledge and a back up car. Having crap cars and apartments all in my 20s and never being sure I would be able to get to work in my crap old car was not fun.

Rust Appreciator
Rust Appreciator
1 hour ago

I was waiting over a year for a chance to spend close to $50k for a new Toyota Sienna, finally gave up and spent $30k less on a used one this summer. Only way I could imagine buying new now would be if they actually start making the base model in meaningful quantities.

Mechjaz
Mechjaz
1 hour ago

I think more fundamental financial advice is “don’t gamble what you aren’t willing to lose.”

Phantom Pedal Syndrome
Phantom Pedal Syndrome
1 hour ago
Reply to  Mechjaz

Or… “don’t go broke trying to look rich.”

AJ
AJ
1 hour ago
Reply to  Mechjaz

How about “don’t go chasing waterfalls” ?

Mechjaz
Mechjaz
1 hour ago
Reply to  AJ

TLC Financial Advisors ™

Parsko
Parsko
57 minutes ago
Reply to  AJ

Please stick to the rivers and the lakes that you’re used to

Jdoubledub
Jdoubledub
1 hour ago

Coworker just sold a turbo PT Cruiser that ran and only needed a wheel bearing for $1,300. Blew me away that a car that ran was sold for a reasonable price.

Michael Beranek
Michael Beranek
1 hour ago

I still find these “used car price” stories a little suspicious. A lot of people like to say, “The average price of a used car is currently $X”, but that’s lumping a 2023 Lamborghini and a 1994 Chevy Lumina with no brakes, rusted subframes, and a blown transmission into the same group. And that’s not right.
The automotive journo world needs to figure out how to differentiate between late-model used cars that sell for 5 or 6 figures and beater-land specials in the sub-8k range.

Steve's House of Cars
Steve's House of Cars
1 hour ago

I think that’s a valid point, but it’s also worrying about the extremes, the edge cases. The vast majority of the used car purchases every day are cars that are intended to be a daily driver and owned/used for a number of years. The 2023 Lambo and undriveable 1994 Lumina sales are a fraction of a percentage of the actual sales and would fall on the small sides of the car sale transaction price bell curve.

Also worth considering is that, if all used cars are getting counted, that all new cars are also getting counted. Every $5m one-off Ferrari, $3m Bugatti, etc. are also skewing the curve.

ElmerTheAmish
ElmerTheAmish
24 minutes ago

Median would be the better metric, as averages are more easily swayed by the extremes. It would make comparing years more difficult since we’ve been using average seemingly forever, but that’s another ball of wax.

At this point, I take the comparisons of the years as an interesting market insight, and that’s mostly it.

Data
Data
2 hours ago
  1. I wish I had invested 25k in Carvana 2 years ago. I could retire.
  2. I just bought “Back to School” on blu-ray two days ago; weird. Call me when you have no class.
  3. Car prices will never be reasonable again, much like my grocery bill and auto insurance. If my income had increase 50% like just about everything else it would be fine.
Michael Beranek
Michael Beranek
1 hour ago
Reply to  Data

Oooo, Jadzia Dax is in that, without the spots.

Mechjaz
Mechjaz
1 hour ago
Reply to  Data

Remind me to talk to you about being physical media nerds sometime. I like the cut of your jib.

My Goat Ate My Homework
My Goat Ate My Homework
18 minutes ago
Reply to  Data

If you had invested 25 k in Carvana 3 years ago you would have about $20k.

A. Barth
A. Barth
2 hours ago

no country that looms, Bela Lugosi-like, over Europe

Bela Lugosi’s dead

The bats have left the bell tower

The victims have been bled

Red velvet lines the black box

PlugInPA
PlugInPA
2 hours ago

It probably helped Carvana that Vroom went all the way under.

Canopysaurus
Canopysaurus
2 hours ago

As long as buyers are willing to accept what amounts to a mortgage for new cars, prices will never come down. Greed is good.

Kevin B Rhodes
Kevin B Rhodes
2 hours ago
Reply to  Canopysaurus

Here’s the thing. Lots of people still have lots and lots of money. And with cars being so much better than in the past, there is really no reason to buy a new hairshirt when you can buy a used much, much nicer car for the same amount of money. So the new cars that are sold tend to be rather expensive and nicely equipped ones, and the cheap hairshirt new cars don’t sell at all and are being rapidly put out to pasture. There is just no reason at all to buy a new Mitsubishi Mirage when you can get a CPO Civic for the same money that might as well be a Rolls-Royce in comparison.

ElectrifyAllTheThings
ElectrifyAllTheThings
1 hour ago
Reply to  Kevin B Rhodes

Exactly this! We are in a situation where we want an EV, and can afford New any non-luxury EV. But for the same price, we can get a 2-3 years old Merc EV with better tech, more comfortable, and the remainder of the 10 year / 150k miles battery warranty.

Matt Sexton
Matt Sexton
2 hours ago

I think the fact that Carvana still exists and is now thriving is testament to how universally despised the “traditional” buying process is at “traditional” dealers.

It’s as if the world is slowly waking up to the notion “Wow, it really can be this easy” once they get past their buying-something-that-expensive-online fears.

Dodsworth
Dodsworth
1 hour ago
Reply to  Matt Sexton

I couldn’t agree more. It’s exhausting thinking you have a price nailed down on a car, and then you have to see the business manager. They’ll spend forever pounding on you to buy all sorts of warranties. At Carvana and Carmax they’ll ask you once if you want to buy a warranty. You say no thanks and they say OK. Also, the price is the price is the price. Yes or no, buy or go.

ElmerTheAmish
ElmerTheAmish
31 minutes ago
Reply to  Matt Sexton

Possibly the best buying experience I ever had was at CarMax. They let me drive a few vehicles I was considering, then transferred one in that was the spec/price I wanted. No games, only mild pressure on their warranty (which I made out on, though not quite as well as Doug). Easy.

I’ve bought two cars since, and while it was straightforward enough since I went in prepared, I didn’t have to prepare before CarMax, which was a nice feeling!

My Goat Ate My Homework
My Goat Ate My Homework
6 minutes ago
Reply to  Matt Sexton

Sorta.
Carvana is thriving because their consumers self-select to a certain part of the population. They aren’t dealing with good old Pa down the road that never paid list price for nothin. They also aren’t dealing with people paycheck to paycheck or those that can’t get financing.

So, dealers are stuck with high list prices and room to haggle because there is still a large population of consumers that feel better about haggling down from 15k to 12k then just paying 12k as the list price. And they are stuck with financing departments trying to make money off of more financially viable customers to make up for the no money down 7 year high risk loan they just sold a 10 year old car under.

I’m not saying dealers can’t improve, that’s obvious. But Carvana is basically only dealing with the easiest part of that whole population. Dealers might be “despised” by some. But others still prefer it over Carvana. Especially if they had to deal with some of the crap Carvana pulled in the past.

Boyd Sloane
Boyd Sloane
2 hours ago

China isn’t taking it lying down.”

Seems more like they are attempting The Triple Lindy.

Arch Duke Maxyenko
Arch Duke Maxyenko
2 hours ago

Does Oingo Boingo count as Ska?

Last edited 2 hours ago by Arch Duke Maxyenko
VS 57
VS 57
2 hours ago

In the crazed sort of way that Brave Combo counts as a Polka band, yes.

AssMatt
AssMatt
1 hour ago
Reply to  VS 57

No fair, they identify as Polka!

I’d never heard of these guys, thanks for the heads-up.

VS 57
VS 57
1 hour ago
Reply to  AssMatt

True. But then there’s the disc they did with Tiny Tim…

Acrimonious Mofo
Acrimonious Mofo
2 hours ago

I feel like Mr. Bungle’s first album was heavily influenced by Oingo Boingo in the sense that you can hear a lot of Ska in it, but realistically you’re not going to call it Ska.

Leighzbohns
Leighzbohns
2 hours ago

Not many people compare Mr. Bungle to Oingo Boingo, but you did. And no, it’s not ska.

AssMatt
AssMatt
2 hours ago

I think Ska needs to be in 4/4 time, although you can skank like hell to “Dead Man’s Party.”

Michael Beranek
Michael Beranek
1 hour ago
Reply to  AssMatt

A think a Ska Waltz band that only did 3/4 would be pretty cool.

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