Why Are Used Cars So Expensive?

Posted on by Damar

Added on March 8, 2024
Aaron Widmar
car prices , Expensive cars , Inflation , pre-owned cars , used car buying , Used Car Market , Used Car Prices , used car shopping

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2018 GMC Yukon XL at the 2018 Chicago Auto Show
2018 GMC Yukon XL at the 2018 Chicago Auto Show
Photo: The News Wheel

Good luck following your dad’s advice to always buy low-mileage, good-condition used cars for under $5,000. Pre-owned vehicles used to be great deals, selling for a fraction of what a new car would. Now, it’s hard to find a decent-condition used sedan, SUV, or truck for under $15,000. Why have used vehicles become so expensive in recent years? Here are four clear reasons for the price increases.

Having Trouble Finding an Affordable Used Car? Here are some helpful shopping tips

Supply and demand issues

The 2020 pandemic had a major impact on the automotive market and continues to leave lasting effects. Shutdowns in production, supply disruptions, labor shortages, and shipping bottlenecks put fewer new cars on the market — and a higher demand on used cars. Thus, the average prices of many used vehicles jumped drastically as customers were willing to pay more.

According to Consumer Reports data, used car prices spiked by over 50 percent during 2021-2022. Even high-mileage cars with 100,000-109,999 miles on the odometer sold for an average of $16,489 in June 2021, as reported by Edmunds. In fact, you may be able to sell your used car back to a dealership for almost the same amount of money you paid for it 4-5 years ago.

While the average prices have reduced by 5-10% in the past year, it’s doubtful they’ll ever return to their pre-pandemic rates.

Inflation

The US dollar doesn’t have the buying power that it once did. While the annual inflation rate from 2013-2020 averaged 1.6% every year, the rate rocketed to 6.75% in 2021-2022. Since 2019, inflation has risen by around 19%.

With every year that the dollar inflates, you need to spend more money to buy the same products — and that includes used cars. A $10,000 used car in 2017 would cost nearly $12,500 in 2023. And that’s not factoring in other influences like quality and supply.

Improved quality

Many used cars used to fall apart once they crossed 150,000 miles, which made high-mileage cars a real steal. Automakers have stepped up their game and invested more in the quality of their vehicles.

“It’s been a long-held belief among many car buyers and sellers that a vehicle’s value begins to decline dramatically once it crosses the 100,000-mile mark, but that’s proven to be wrong as vehicle technology and durability have greatly improved over the years,” says Ivan Drury, Edmunds’ senior manager of insights.

Certified pre-owned programs have set a higher bar for used cars, which have to meet stricter quality standards past 50,000 miles than they are used to.

More technology

It’s been around five years since many automakers began introducing innovative technology like head-up displays, semi-autonomous driving abilities, and advanced infotainment software. These hi-tech additions are costly and cause new car prices to rise accordingly.

As the MSRPs of new cars continue to grow, so do the average retail prices of those same models when they hit the used market. Now that you can buy a used Chevrolet with Super Cruise or a used Volkswagen with IQ. Drive, your purchase won’t be cheap. There’s no such thing as a bare-bones used car anymore when even driving assistance technology and touch screens come standard.

While pre-owned vehicles may never reach the low prices they were a half-decade ago, you can still find a great deal on a used car. How? By doing your research, considering a wide array of models, and doing business with a dealership that prices their cars fairly based on their Blue Book value.