Used Car Prices Increase, Outpace New Cars

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author photo by Autotrader July 2010

When shopping for a car, it's easy to assume you're saving money when you buy the car used or pre-owned. The rule of thumb has always been – new cars drop their value the minute you drive them off the lot. Well, the folks at Edmunds.com ran a study that challenges that truth. The results of a recent Edmunds survey demonstrated that the average price of a three-year-old car has shot up 11.1 percent from last year – more than triple the usual annual increase.

For anyone who's looked for a used car lately, this news may not be too surprising. Newer cars are made better and now, with many car buyers seeking out good deals due to the economic recession, used cars have jumped in popularity. The simple rules of supply and demand suggest that with an increase in popularity comes a decrease in supply, thus driving up prices.

On the other side of the equation, new cars receive incentives and low financing rates that can actually make the price lower than a used car of the same type. According to the study, a total of 41 vehicles are cheaper to buy new than their lightly used counterparts – and another 73 are about the same new or used.

Examples given in the research include the Audi S4 Premium Plus, where the average new model costs more than $60 per month less than the average used version. Another example is the Volkswagen New Beetle convertible, which has a new car monthly payment of $50 per month under a slightly used one.

Interestingly, one of the automakers whose used car prices have increased the most in the last year is General Motors. GM's used car prices increased by 7.8 percent, surpassing most other automakers – a surprise, considering the firm's recent emergence from bankruptcy. Truck-based SUVs have also seen a sharp rise, including GM's Chevrolet Tahoe, with three-year-old models up more than 30 percent in price compared to last year.

"The lesson is definitely do research," Edmunds.com senior analyst Jessica Caldwell told The Chicago Tribune. "Just because you want to buy a car and don't want to pay that much, don't necessarily assume that used is cheaper." Indeed, with numerous low-percent finance deals and manufacturer-sponsored rebates and incentives, research will be important for consumers to get the best deal – new or used.

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This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Used Car Prices Increase, Outpace New Cars - Autotrader