If You’re Paying Top Dollar You Might as Well Be Paying For a New Car
Due to the semiconductor shortage and high demand, there has been a price hike on used cars with some new cars proving to be less expensive.
Written by Serena Aburahma
In the past few years,
car buying
has been tricky to navigate. Because cars depreciate so quickly, purchasing a used car was often seen as the better deal. Buying an older car can also potentially save a lot of money on auto insurance
.However, recent Jerry data proves that this is no longer the case. Many buyers will actually pay less for a new 2022 model compared to a 2021 vehicle with a few thousand miles. What's driving these unprecedented price hikes for older cars?
Prices of used cars vs. new cars
According to our research, four of the most popular cars in the U.S. are cheaper to buy new right now. Half of them only have marginal price differences. A new Honda Civic or Toyota Highlander is only $120-$140 cheaper than its used counterpart.
However, you can also get a new Honda CR-V for $700 less than the average used model. Most buyers spend around $2,000 more for an older Toyota RAV4 compared to the latest one.
Additionally, prices for these used vehicles in Oregon and Maine are soaring above our average estimates. Montana residents are also struggling, paying an average of $42,217 for any given used car. In North Dakota, the average used car's sticker price has increased by over $11,000 since 2021.
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Why are used cars so expensive?
Auto manufacturers are still experiencing the effects of the global pandemic. As remote work increased to stop the initial spread, demand for computer equipment was at an all-time high. As a result, the semiconductor chips used to power these electronics were swiftly bought up by computer manufacturers.
Unfortunately, the computers in modern cars are powered by those same semiconductor chips. Without an excess of chips to go around, the production of new cars stalled.
At first, both used and new vehicle sales stagnated as more people were staying home. However, with the introduction of vaccines and lifted mandates, people finally felt comfortable buying cars again.
The available used cars were quickly bought up, and dealers are still struggling to keep vehicles on their lots. Any used cars that get traded in or sold to the dealership are marked up to match consumer demand.
Ordering a new car directly from the automaker allows you to avoid dealer markups. However, since more people are pursuing this strategy, you'll likely be waiting several weeks for your vehicle to arrive. The longer you wait, the more likely you also might have to deal with additional production delays.
MORE: Midwest States Pay the Least for Used Cars
How to get the best deal
If possible, order your new vehicle at least six to eight weeks before you actually need it. That's the average time it takes for a vehicle to be delivered, provided that there are no production hiccups.
Also, keep yourself open to alternatives. Your second or third-choice car could cost hundreds (or thousands!) of dollars less than your favorite option. Car prices probably won't go back to normal anytime soon, so it's important to use your budget wisely.
MORE: New Car Prices Continue To Set the Wrong Kind of Records
Used cars or new cars: which ones have cheaper auto insurance policies?
Used cars usually have cheaper insurance because these vehicles are easier to repair or replace after an accident. Any car will also be cheaper to insure if you only purchase the minimum amount of coverage required by your state.
However, some insurance carriers will still charge more for full-coverage policies on older cars compared to new ones. Classic cars and other popular vehicles are also more expensive to insure because of their high resale values.
No one wants to pay more for auto insurance when cars themselves are already so costly. To find the best deals in your area, sign up with
Jerry
. A simple search only takes a few seconds and generates affordable insurance quotes for cars of any age.
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