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Amid Inventory Shortage, Used Prices Approach New

honda-used-car-dealership.jpg Cars.com photo by Christian Lantry

Financial experts often advise car shoppers to buy used instead of new in order to save on the vehicle’s purchase price and bypass high initial depreciation. But amid the impact of a global microchip shortage, this advice may no longer be as relevant: Delays in new-vehicle production from the chip deficit have caused a domino effect for the used-car market that’s driven prices sky-high. How dramatic is the increase? So much that the gap between median prices from Cars.com dealers on one-year-old used vehicles versus their brand-new counterparts has fallen to a fraction of what it traditionally is.

Related: Car Shoppers Face Shorter Supply, Rising Prices

We examined median prices in June 2021 from Cars.com dealers for new 2021 model-year vehicles and their one-year-old used (which is to say, 2020) counterparts. We’ll caution that dealer-listed prices aren’t always the same as the negotiated prices consumers actually pay — in today’s environment, the latter might be influenced by demand and availability — but they’re a useful bellwether nonetheless.

What did we find? While new vehicles still come with a higher median price overall than their one-year-old used counterparts, the difference is now substantially smaller when compared with new and lightly used vehicles before the COVID-19 pandemic.

New Versus Used Car Prices: Overall Trend

As of June 2021, used one-year-old (2020) models have a median price of $36,750 at Cars.com dealers. That falls below the $38,817 median price of new (2021) cars at Cars.com, but not by much. The median list price for a one-year-old used car is 94.7% of the median price of a new car. At face value, the aggregate savings for going used amounts to a paltry 5.3%.

Where the inventory shortage really comes to light is when you compare the overall situation with vehicle prices just two years ago. In June 2019, one-year-old used (2018) cars had a median price of $27,595, while then-new 2019 cars had a median price of $35,839. This means that in 2019, a one-year-old used car had a median price that was 77% of a new car. Two years ago, buying a one-year-used car could save you 23%.

Buying or Selling a Car During the Inventory Shortage

The pricing trends listed above could tempt used-car shoppers to look for a new vehicle instead, but finding that exact vehicle in supply will likely be a challenge. The fleeting supply caused by the inventory shortage might make you more inclined to move fast on a purchase, but the pricing trends we found indicate it may be wise to do more research — comparing new and used pricing — and cross-shop different brands.

While buying a new or used vehicle right now can be a challenge, car owners looking to sell an extra car are in luck, as the shortage also means dealers are paying top dollar for used vehicles to fill their lots.

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