As the price gap between new and used vehicles reaches an unprecedented level, many consumers are feeling the tension of escalating costs in the automotive market. A recent study by Edmunds revealed that in the third quarter of 2024, the average new car cost $47,542—$20,365 more than the average used car, which sold for $27,177. This marks the first time the disparity has surpassed the $20,000 threshold, underscoring a significant trend in consumer purchasing behavior.
While new car prices have remained relatively stable or have increased slightly, used car prices dropped by 6.2% compared to last year. However, this decline does not offset the staggering 31.4% rise in used car prices since Q3 2019 due to the pandemic and ongoing chip shortages that have disrupted the automotive supply chain.
Previously, incentives for purchasing new cars helped reduce the price gap, but these incentives have diminished due to supply constraints. Fortunately, as the supply chain stabilizes, these incentives are making a comeback.
Edmunds notes that the average discount on new vehicles increased to $1,744 in Q3 2024, compared to just $828 during the same period in 2023. Despite these discounts, new cars are experiencing longer turnover times, with the average new vehicle taking 57 days to sell— the longest duration in over three years. In contrast, used cars sold much faster, averaging just 36 days on the lot.
While the allure of used cars as a more economical option is undeniable, many buyers face a harsh reality regarding financing. More than 56% of potential buyers expect their monthly payments to be $300 or less, a figure reminiscent of pre-pandemic times. However, the current average monthly payment for a used car has risen to $548, far exceeding the budgets many buyers have in mind.
For those looking to stretch their dollars, the options within their budget have significantly diminished. Today’s frugal shoppers, aiming for a $200-$300 monthly payment, will likely find themselves limited to used cars that are, on average, three years older and have accumulated 16,000 more miles than what they could have purchased for the same budget just four years ago in 2019. This shift underlines the changing dynamics in the automotive market and serves as a stark reminder of the rising costs associated with vehicle ownership in today’s economy.
