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Hoping For A Deal On A 'New Used' Car? Don't Hold Your Breath

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If you're looking to buy a car, and you're hoping to save money by grabbing one from the "used" lot, you may be in for a bit of a shock. According to Alec Gutierrez, a market analyst at Kelley Blue Book, new vehicles now sell for just 11.5% more than their one-year-old equivalents -- and in some cases the gap is far slimmer.

This is big news that could upset some of the conventional wisdom we've heard about smart auto shopping. Many financial advisers have encouraged buyers to go with "new used" vehicles, which are about a year old. Those cars don't have a lot of wear and tear, but they've traditionally been much cheaper than their brand-new siblings. That's because cars depreciate dramatically the minute they're driven off the lot.

Or at least, that's the way things used to be. However, the data from KBB would seem to indicate things are changing. The question is: why?

The biggest reason is the increased value of used cars rather than shrinking new-car prices. Even though they've come off the record-highs seen earlier this year, used cars are still worth more than they once were. That's because of a shortage of used cars, thanks to:

1. The fact that people are holding onto their cars for much, much longer nowadays.

2. The Great Recession, during which automakers built fewer cars.

But not all used cars carry the same value. Due to high gas prices, fuel-efficient models are worth significantly more.

In fact, "new used" subcompacts and compacts are only about 5% - 7% cheaper than their brand-new equivalents. With hybrids the savings are even slimmer -- just 3% or 4%. And that's before considering incentives like rebates and low APR loans.

KBB offers a couple of instructive examples: the Blue Book value of a new Honda Fit is $17,234. The used value? $17,000. The Blue Book lists the new Subaru Impreza at $17,450, while a modestly used one is worth $17,300.

Even in the case of less fuel-efficient vehicles, the prices are often neck-and-neck. For example, the new Jeep Wrangler has a Blue Book value of $22,281. The used version is just a couple of hundred bucks cheaper, at $22,000.

Of course, this is great news for new-car dealers. Not surprisingly, Kelley has tracked an uptick in traffic on the new-car section of its website. Also, new car sales are up across the board, while year-over-year used car sales have declined around 4% or 5% in recent months.

Shoppers: does this sound like good news to you? Does it affect your buying plans in the near future? Let us know in the comments below.

 
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Comments (3)
  1. What about the The Great Cash for Clunkers program that removed almost 700,000 used cars from the market place. What's Obama going to do now to help those that can't afford a car?
     
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  2. I wish the used car trade in value followed this trend....the dealers are just marking them up more than ever.
     
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    Bad stuff?

  3. In the UK, we frequently have 30% and even 40% first year differences in values, so this article is "odd" to us! However, the sold "parque of cars" each year is 10% of the US market and highly fragmented by many thousands of varying derivatives, which actually doesn't help values in some ways but creates huge differences between values of vehicles later in lifecycle and the new-to-market products arriving for early sale.
     
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