The Unbelievable Reason You May Pay More for a Used Car Than a New One Right Now

Trying to pinch pennies by buying a used car rather than a new one? You might want to think again. That conventional wisdom could cost you.

Right now, the auto market is so out of whack that many used car models are selling above the manufacturer's suggested retail price (MSRP), aka sticker price, for the brand-new version. In fact, according to a new industry analysis from car insurance agency Jerry, that’s the case for almost all of the most popular 2021 models on the used car market.

“The value of a new car previously fell by thousands of dollars as soon as you drove it off the dealer’s lot,” wrote Ben Guess, the author of the report. “The pandemic has changed that for many models.”

Now, the opposite is likely. Jerry’s research found that nine of the 10 most popular used models in 2021 are selling above the sticker price for the brand-new 2022 model. And in several cases, they're going for thousands of dollars more.

For example, a used 2021 Toyota RAV4 is selling for an eye-popping $5,000 above MSRP for the 2022 model. Want a used Honda CR-V instead? Get ready to shell out $3,300 above sticker price.

According to Guess, a tight supply for new vehicles has steered many buyers into the used car market, resulting in record-high prices for used vehicles. The Labor Department said Friday that the price of used cars rose 16.2% between May 2021 and May 2022, nearly double the overall inflation rate of 8.6%.

Why used cars are so expensive in 2022

Used cars costing more than new ones? That just doesn’t sound right. But some car buyers are willing to pay a premium to get a 2021 model today rather than wait for the 2022 version to ship from the manufacturer — a process that is taking much longer than normal due to supply chain issues. As a result, the auto market has been turned upside down.

The main caveat to note with Jerry’s data is that it compares used-car sale prices to MSRP. These days, the MSRP isn’t what many new cars are truly selling for. According to Kelley Blue Book, new cars are also selling for about $1,000 above MSRP.

Pre-pandemic, it was common for new vehicles to roll off the lot with steep discounts from the sticker price. All that changed due to the microchip shortage, which has totally disrupted the supply of new cars. In May, new cars sold for $47,148 on average, creeping ever closer to the all-time high of $47,202 notched in December 2021.

Economists at Cox Automotive, the parent company of Kelley Blue Book, expect the chip shortage to ease later this year. But that won’t necessarily mean cheaper cars anytime soon.

“Prices for both new and used vehicles are showing signs of stabilizing,” Rebecca Rydzewski, an economic researcher for Cox Automotive, said in a news release Thursday. “However, no one should expect price drops, as tight supplies in the new market will hold prices at an elevated level into 2023.”

In short, if you're in the market for a vehicle — new or used — you should expect to pay well above the sticker price for the foreseeable future.

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