The price gap between new and used cars has surpassed $20,000, setting a new record high. This trend follows significant new car price increases due to supply chain issues affecting semiconductors and raw materials since the COVID-19 pandemic.

Despite manufacturers offering various incentives like discounts to promote sales, high auto loan interest rates and economic uncertainty are making consumers hesitant to purchase new vehicles.

According to the automotive information service Edmunds, the price gap between new and used cars in Q3 2023 reached a record $20,365. This is the first time the gap has exceeded $20,000.

During Q3, the average selling price for new cars was $47,542, while the average used car price was $27,177. Back in 2019, before the pandemic, this price difference was around $16,300.

The primary cause for this increased gap is the surge in new car prices due to supply shortages that arose during the pandemic.

Edmunds reports that, with an average auto loan interest rate of 7.1%, new car buyers would need to pay $737 per month over six years. Additionally, auto insurance costs have risen by 38% over the past two years, further reducing purchasing power. Since 2021, when inflation began surging, insurance costs have increased by 50%. Although manufacturers are boosting incentives to attract hesitant consumers, elevated new car prices remain a financial burden. Edmunds found that the average new car discount increased from $828 in Q3 2023 to $1,744 in Q3 2024.

Meanwhile, used car prices have been trending downward as the supply of new cars normalizes, leading to more available used car inventory.

In Q3, used car prices dropped by 6% compared to last year, yet this is still a hefty price level for consumers. Used cars now cost 31.4% more than in Q3 2019, when the average price was $20,683.

Fullerton resident Mr. Park stated, “I wanted to buy a new car, but the prices have risen significantly,” and added, “Considering the economic situation, I feel like I’ll have to go with a used car.” Edmunds anticipates that while many consumers are interested in new cars, the sharp price increases in recent years will keep a substantial number in the used car market. In an Edmunds survey on vehicle purchasing preferences, 49.8% of respondents chose “new car,” 26.4% preferred “used car,” and 23.8% indicated “depends on price.”

Edmunds noted, “Consumers who selected ‘new car’ or ‘depends on price’ may ultimately turn to used cars because new vehicles under $20,000 are unavailable.”

However, even those opting for used cars find it challenging as used car prices have risen by 30% over the past five years. According to Edmunds, “Consumers who opted for ‘used car’ in the survey expressed a willingness to pay monthly installments below $300,” though the average monthly used car payment has already increased from $413 in Q3 2019 to $548 in Q3 2023, highlighting a mismatch between consumer expectations and market prices.

Karl Brauer, an executive analyst at the automotive site iSeeCars.com, advised, “If budget is an issue, there are many quality used cars available that have lower long-term maintenance costs.”

<Hongyong Park>