Car shoppers hoping used cars will offer a solution to record-high prices for new cars are likely to be disappointed when they hit the lot this year; used car sales were up 3.3% in 2014 compared to 2013 according to auto data site TrueCar, and are expected to continue to rise.
A combination of factors plays into this trend. Slower new-car sales over a number of years mean that fewer late-model vehicles have made their way to used-car lots. This is combined with higher demand to drive higher prices. The average cost for a used car in 2014 was $16,335.
Low fuel prices have also allowed key groups of vehicles that used to sell more cheaply due to high ownership cost, such as SUVs and pickups, to become economical again. Tom Kontos, chief economist for Adesa, a company that auctions wholesale used vehicles, told USA Today Jan. 9 that prices of small SUVs went up 8.8% in the wholesale market. Full-sized vans gained 10.5%, while large SUV prices went up a whopping 11.2%.
Potential for Deals
Of course, there are still deals to be found. The average new car, according to TrueCar, cost $31,831 — nearly twice the average for a used car. Numbers like those make it no surprise that in the United States, the ratio of used to new cars sold is approximately 3.3 to 1.
But getting an excellent deal on a used vehicle may take a little more research now that the market has reached pre-recession levels. A new study from iSeeCars.com offers prospective buyers some guidance on which cars depreciate the fastest, and therefore offer the greatest potential savings when bought after just one year of use.
“Everybody knows that new cars depreciate the most in the first year and that different cars have different depreciation rates, but we wanted to see which used cars experienced the largest price drops compared to their new models,” iSeeCars.com chief executive Phong Ly told the Washington Post Jan. 21.
The list of cars offering the 10 biggest discounts was fairly evenly split between luxury models and more modest choices. A Hyundai Genesis, the report found, depreciates 38.2% in the first year for a $16,600 savings. The Smart Fortwo, Cadillac CTS, Chevrolet Impala and GMC Yukon rounded out the top five, all offering at least a 32.8% discount after the first year.
Reasoning for Diminished Value
In general, a combination of simple styling, reliability and fuel economy seem to make a used car popular on the market.
However, there’s not much rhyme or reason to which cars retain their value and which don’t from a mechanical standpoint, Ly said. When a car is significantly redesigned, older models can look instantly dated and therefore drop in value dramatically. But again, this doesn’t always hold true.
As the Globe and Mail noted Jan. 18, even some former North American Car of the Year Award winners turn out to be less than desirable a few years down the road.
The Chrysler PT Cruiser, for example (now only available used because the model line has been discontinued), doesn’t draw any praise from car expert Neil Vorano despite its low average asking price. His assessment: “Even the $8,000 that some are asking seems ludicrous.”