Why Some Used Cars Are Actually Gaining in Value
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Here's your Money Briefing for Friday, February 18th. I'm J.R. Whelan for The Wall Street Journal. Normally, when somebody asks you, hey, can I sell you a used car, you might expect to get a decent price. Not so in the current car market. Prices for used cars have risen so high that some people who bought a new car in the past few years are finding it worth more now than when they first drove it off the lot.
There's sort of a weird power in that for people who have recently purchased vehicles. It's like all the rules are flipped around.
So how much should you be prepared to shell out for a used car? And when can we expect prices to tap the brakes? Our auto industry reporter Nora Eckert has been digging into the numbers. We'll talk with her about it after the break.
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Earlier this month, we told you how some new cars are selling for as much as $10,000 above sticker price as dealers struggle to keep up with demand. Well, don't think that a visit to a used car lot will help you escape high prices. WSJ Auto Industry reporter Nora Eckert has been checking out the used car market, and she's here with details. Hey, Nora, thanks for taking the time to chat.
Yeah, thanks for having me on, JR.
So Nora, this is a tough time for someone not only to find a car to buy, but also not to pay through the nose. And we've been following this for a few months. So why are prices for used cars still so high?
So what we're seeing now is the result of months and months of an inventory crunch, really clamping down on dealerships and making these lots bare, combined with really sustained demand from consumers. So it's come to a boiling point recently where we're seeing these record used and new car prices because there just isn't enough on the lot and there's too many people looking for these vehicles.
All right, so let's talk numbers. In terms of resale value, how are prices on used cars rising relative to their value when they renew?
We're seeing used car prices skyrocket, and we have a few different metrics to measure this by. One of the ones we cite is from the Labor Department, which shows that used car prices rose about 40% in January from a year ago. But when we look at how this plays out... Wait, wait, wait.
40%? I mean, I knew the numbers were higher, but 40%?
Exactly, exactly. All the rules are off. I think the used car market used to be much more accessible, you know, for first time buyers and people who are looking for their second, third vehicle, but that's not really the case anymore. But when we look at how this plays out specifically with different model years, we have some interesting data from J.D. Power. So say you bought a new car in last year, in 2021, and you bought it in April, and it was around $38,000. According to the data that we have today, that car would sell for about $48,000. So the same car, just about nine months older, is worth about $10,000 more than when you originally bought it.
Wow. And so if someone bought a car recently, they could actually make money on a trade-in deal.
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