Top Used Vehicles Still Sell for More Than New MSRPs
Henry Hoenig
· 4 min read
- Key Insights
- Pandemic Drives Vehicle Shortage
- Rising Demand for EVs Props Up Used Prices
- Prices for New Vehicles
- Conclusion
- Methodology
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Not all used cars are created equal. So if you’re looking for big declines in prices for a lightly used Toyota RAV4, for example, you’ll likely be waiting a long time.
While overall prices for used cars
tumbled
in the fourth quarter of 2022, lightly used 2022 models of five of the 10 best-selling vehicles in the U.S. are still worth more than the manufacturers’ suggested retail price (MSRP) on comparable new 2023 models. The same is true of three of the top five best-selling electric vehicles. (Tesla’s Model Y made both lists.)Blame strong demand for those models and, crucially, an extreme shortage of 1- to 3-year-old used vehicles that is expected to last at least several more years.
Key Insights
- Despite recent declines in used car prices, lightly used 2022 versions of half of the 10 best-selling models in the U.S. still command resale prices that are higher than the MSRP on new 2023 models. All are pickup trucks or SUVs.
- Lightly used one-year-old versions of three of the five best-selling EVs in 2022 are also worth more than the MSRP on new 2023 models.
- With new car prices spiraling upward, demand for lightly used vehicles is expected to remain strong. Total nationwide inventories of used vehicles fell 3% in 2022 from a year earlier, but the decline was entirely in the $20,000-$30,000 price range. Inventories in all other price ranges rose.
- Toyota has struggled more than most car makers to keep cars on dealer lots. Its inventories ranked lowest among all major automakers at the end of 2022, which is one reason two of the five used 2022 models selling for more than 2023 MSRP are Toyotas.
The difference in values for 2022 models and 2023 sticker prices topped $4,000 for the Ram Tradesman pickup truck. Two other pickups made the list.
- Ram Tradesman ($4,000 more)
- Tesla Y ($2,700 more)
- Toyota RAV4 ($2,300 more)
- GMC Sierra ($1,500 more)
- Toyota Tacoma ($1,100 more)
Pandemic Drives Vehicle Shortage
Used-car values, especially for the most popular models, have been inflated by a shortage of new vehicles following the outbreak of COVID-19. Pandemic-driven shutdowns disrupted the flow of semiconductors needed to make cars, reducing output and inventories. Though conditions have improved, auto makers are still struggling with production shortfalls and sporadic shutdowns and likely will be for
several more years
.Many frustrated would-be buyers of new vehicles turned to the used market, driving overall prices up more than 40% as inventories dwindled starting in 2021.
Inventories of used vehicles fell again in 2022, by 3% overall, driving down retail sales volumes by about 10% from the previous year. But the declines in inventories were entirely concentrated in vehicles with a list price of $20,000-$30,000, according to Cox Automotive. Inventories rose in all other price ranges, indicating the imbalance between supply and demand was greatest for lightly used vehicles with a mid-range price.
This is one reason vehicles such as 2022 RAV4s continue to sell at premium prices. At the end of 2022, Toyota had just over 20 days’ supply, about one-third of the average of nearly 60 days, according to Cox. A lack of inventory hit Toyota’s U.S. sales of new vehicles, which fell 9.6% from a year earlier. That’s more than 200,000 new vehicles taken off the market and no doubt many of their would-be buyers were looking for lightly used versions instead.
Rising Demand for EVs Props Up Used Prices
Record-high gasoline prices in 2022
helped push interest in EVs to new heights
, with about half of American drivers now saying they are interested in getting an EV as their next vehicle. This has also been reflected in the used car market. In addition to the Tesla Y, the lightly used 2022 models of the Volkswagen ID.4 and Chevrolet Bolt EV are both worth more than the sticker price on new models.- Volkswagen ID.4 ($3,500 more)
- Tesla Y ($2,700 more)
- Chevrolet Bolt ($600 more)
To be sure, with the Tesla Y and the Chevy Bolt, the MSRP for new 2023 models was cut significantly — $13,000 for the Y and $5,900 for the Bolt. But the fact that used versions are still selling for more than the sticker price on new models that should be in showrooms right now points to a continued imbalance in the market.
Prices for New Vehicles
Of course, the vehicle shortage also affected prices of new vehicles. The average transaction price of new vehicles nationwide has exceeded the MSRP for 18 consecutive months, though in recent months the spread has been narrowing, according to Cox.
Again, the choice of vehicle matters. Jerry found that the average listed online price for new 2023 models of five of the 10 best-selling vehicles exceeded the MSRP:
- CR-V: $3,500 above MSRP
- F-150: $2,900 above MSRP
- RAV4: $2,200 above MSRP
- Camry: $2,000 above MSRP
- Grand Cherokee: $1,500 above MSRP
Conclusion
Used-car prices are expected to fall further in the first half of 2023 but the declines are expected to be smaller than in 2022, as pent-up demand keeps a floor under prices. This will be especially true for the most popular models and will remain so until production of new vehicles returns to pre-COVID levels, which is not expected to happen for several more years at least.
Methodology
Due to regional pricing variations, there is no established national average price for particular used models. So Jerry researched average prices for used models in the largest city by population in each state, as well as an overall national average price of used cars (not model specific). To arrive at a national average price for specific used models, we chose the average price for that model in an area near Denver, whose overall average used car price most closely matched the overall national average.
To avoid price disparities due to trim levels, we compared Kelley Blue Book private party values for 2022 base models in excellent condition and with 18,000 miles with MSRPs for the same base vehicle models in the 2023 model year.
