Amid steadily rising new car prices in recent years, buyers considering a vehicle purchase this year may find that new cars offer a better deal than used ones.
A report from Cars.com predicts that both new and used car prices will remain high this year. However, used car buyers will likely face even more challenges in finding quality vehicles at reasonable prices.
While new car demand has slowed, inventories have grown, leading to increased incentives and other benefits for buyers. In contrast, used car prices are climbing due to a shortage of available vehicles and worsening vehicle conditions.
High Interest Rates Impact Used Car Supply
For the past few years, high interest rates have reduced both sales and lease activity, resulting in fewer recently leased vehicles entering the used car market. This has further tightened supply and driven up prices, according to the report.
Jay Jang, Vice President of Eden Motor Group, explained, “During the pandemic, the price gap between leasing and buying narrowed, leading many customers to buy instead of lease. Because leasing decreased, we’re now seeing fewer off-lease vehicles returning to the market, which means there’s a smaller pool of used cars available.”
Data from Cars.com shows that the average age of used vehicles now available is about one year older than five years ago, and average mileage has increased by about 4,300 miles. Analysts attribute this to consumers holding on to vehicles longer as economic challenges, like inflation, persist.
The trend of rising used car prices has also reversed after two and a half years of declines. Experts link this partly to the lingering effects of the Trump administration’s tariff policies, which have indirectly reduced used vehicle inventories and pushed up prices.
According to Cox Automotive, the average price of the 50 best-selling used models in the U.S. has climbed for two straight months, reaching nearly $29,000.
While tariffs have not directly raised used car prices, they have had an indirect impact by changing price and demand dynamics.
New Car Inventory and Incentives Grow
Despite the overall cost of new cars remaining high, there is some relief for buyers this year.
The average price of a new car has fallen slightly from a peak of $50,300 in June 2023 to around $49,000. Notably, new vehicles priced under $30,000 have become 42% more available compared to last year, giving budget-conscious buyers more options.
In addition, automakers are offering a range of incentives to boost sales, making new cars more attractive to buyers. Electric vehicle (EV) buyers also benefit from Inflation Reduction Act (IRA) purchase subsidies and manufacturer discounts, offering even more savings when choosing a new vehicle.
Experts conclude that, given these factors, new cars offer a better value for 2024 car buyers. With more affordable options available and stronger trade-in values down the line, new car purchases are likely to deliver the greatest return on investment this year.
However, if auto tariffs expand further, manufacturers may be forced to pass those costs on to consumers, potentially driving up new car prices again. Experts warn that this could push more buyers back to the used market, fueling additional demand and price hikes there.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
