The Wall Street Journal points out:
Rising new-car prices are pushing more buyers to the used-car lot, where they are finding a growing selection of low-mileage vehicles that are only a few years old.
Demand for used cars was unusually strong this summer and will remain at elevated levels through the year’s end as higher interest rates and rising prices on new cars continue to stretch buyers’ wallets, industry analysts say.
While used-car values have also increased in recent years, the gap between the price of a new and preowned car has also widened and is now at one of its largest points in more than a decade, according to car-shopping website Edmunds.com, making deals on the used car lot look like more of a bargain.
. . .
“Customers forget a new car is now more than $30,000 and they expect it to be $20,000,” said Brian Allan, a senior director at Galpin Motors Inc., a Southern California dealership chain.
“When people see the price has gone up, it is sticker shock, especially when people only buy a car every five to six years,” Mr. Allan said.
At the same time, the used-car market is being flooded with leased cars being returned to dealerships, increasing the supply and options for buyers looking for two- and three-year-old vehicles that are generally well maintained.
. . .
With nearly 40 million in sales last year, the used-car market is more than double the size of the new-car business. The shift in demand is a troubling sign for auto makers, which will be under pressure to deepen discounts to keep customers from defecting to used-car market.
There’s more at the link.
That’s pretty much what drove Miss D. and I to buy our new-to-us Nissan Pathfinder, earlier this month. New prices were so ridiculous, in terms of value for money, that we simply gave up on the new car market. We bought our four-year-old vehicle for almost exactly 45% of the list price of a new edition of the same model. Since we plan to run it until it’s no longer viable, it wasn’t a major issue that it was a year older, and with slightly higher mileage, than most buyers find desirable. It’s been well maintained, with a full service history to prove it, so we aren’t worried that we might have bought a lemon. We’ve already taken it on a 300-mile day trip, and we’re both happy with it. (As another comparison, the current comparable model of the pickup truck I bought almost fourteen years ago [a Ford F150 regular cab SXT] now has a manufacturer’s suggested retail price 211% higher than I paid in 2005. That sort of price inflation is simply unsustainable for folks like me.)
We also noted that most buyers of new vehicles appear to be leasing them, rather than buying them. We ran into this from salespeople all the time. One tried very hard to sell us a Mercedes-Benz, arguing that we could lease it for the same amount of money each month that we’d need to buy a vehicle from a “lesser” manufacturer, so why not enjoy the luxury brand? He couldn’t get it through his head that we weren’t worried about appearance, social status, or whatever. We wanted reliable, affordable transport, which we could run for years without needing to replace it. We got what we wanted. He didn’t. (Shrug.) We also put down a decent deposit, and financed the rest through our local bank, at a reasonable interest rate, over three years instead of five or six. I’d rather pay it off sooner, and be done with it – and, by doing it that way, we’ll never be underwater on our vehicle loan.
I couldn’t help but notice that almost all of the brand-name dealerships we visited were showing a lot more turnover on their used car side than with their new vehicles. It’s clear consumers are voting with their wallets. What does this mean for auto manufacturers? I don’t know, but if I were in their shoes, I’d be getting nervous about pricing my products out of the market.