Why are used cars priced like new cars?
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Why are used car prices soaring to near‑new‑car levels?
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This is the indicator from Planet Money. I'm Ricky Mulvey. Joining me today is our producer, Angel Carreras.
Mulvey, hello, how are you? Doing well. How are you? I'm a little winded. I just uh I just walked here to the office from my home. Congratulations. And Ricky, what I'm saying is I need a car, but buying an affordable car is really difficult these days. I mean, the average new car sells for over Get this. Are you ready? Fifty thousand dollars in the United States.
But today we want to talk about the used car market. We've noticed some economic weirdness, like a used Toyota truck with over 200,000 miles on it going for 20 grand or a decades-old Honda Sedan selling for its original retail price. Like what is going on? How did used cars get to be so expensive? Why isn't depreciation depreciating? Car market researcher Ivan Drury sees the madness.
You know this isn't normal. This
is extremely abnormal. Over the past few years, the cost of a new car has risen at a rate that's close to headline inflation numbers, but something is happening under the surface.
Ricky, I was playing my bugle. Because the affordable used car market as we know it. Is dying. Today
on the show, we'll tell you the three reasons why affordable used cars are so difficult to find. Plus, one area where car buyers can find discounts if you want to be a rational economic actor.
What is the “price waterfall” and how does it push used‑car prices up?
This show won't last long. We've got sedans, we've got SUVs, we've got electric vehicles. And
we've got deals, deals, deals so hot, I can't believe we're allowed to mention them. That's after the break.
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For many Americans, transportation is their second largest expense right after housing. And buying a car is stressful. A war of attrition where you end up in a dealership for hours, test driving, negotiating, waiting a half hour for a salesperson to print out a few pieces of paper.
Whoa, whoa, whoa, Ricky, Ricky, take a chilli pill, man. This uh this all sounds kinda personal. It's a little personal.
Cars, they're a high dollar item, one you don't buy that often. So inflation hits a little different. You only notice the total price increase spread across several years.
And you probably know that new car prices jumped during the pandemic and stayed elevated. But here's the
good news. That price increase, it's smoothing out.
How did pandemic‑related production cuts create a long‑term used‑car shortage?
From twenty nineteen to now, the price of a new car has risen at an annual rate of four point three percent.
The whole CPI index went up annually a little less than 4% in the same time period. The yearly difference isn't totally out of line.
But this is just one part of the market. The used car market is the bad news.
Jeremy Robb is the chief economist at Cox Automotive. It's a big automotive services and tech provider, and it owns Kelly Blue Book and Auto Trader. We asked him why used cars are so expensive. And first, he validated our feelings.
A lot of people really wonder that and get frustrated, you know, and some people angry sometimes with it. See,
used car prices from that same time period, twenty nineteen to now, they've gone up about five and a half percent annually, accelerating past that average inflation number and new car price growth.
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Chapters
8 chapters
1
Why are used car prices soaring to near‑new‑car levels?
0:01–1:31
2
What is the “price waterfall” and how does it push used‑car prices up?
1:31–3:20
3
How did pandemic‑related production cuts create a long‑term used‑car shortage?
3:20–5:28
4
Why are automakers abandoning affordable sedans in favor of SUVs?
5:28–7:30
5
What does the collapse of the $10‑$15 k used‑car segment mean for buyers?
7:30–9:27
6
How are higher interest rates reshaping the new‑vs‑used car decision?
9:27–10:30
7
Where can shoppers still find deals—especially on electric‑vehicle used cars?
10:30–10:52
8
What practical tips can listeners use to navigate today’s pricey used‑car market?
10:52–11:07
Speakers
5 identifiedMore from The Indicator from Planet Money
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