Why some new cars are cheaper than used cars

Recent news of new cars becoming cheaper than used cars may leave many American drivers confused. Since used cars are depreciated versions of new cars, it seems counterintuitive for them to become more expensive.

According to the Wall Street Journal, the high prices of used cars relative to new cars can be explained through supply and demand. Recent years have witnessed a decrease in new car sales, which has translated into a scarcity of one-to-three year old used cars in today’s market. Used cars like these are highly desirable to many consumers with financial difficulties or bad credit history, since they have limited mileage and allow consumers to save on depreciation. The demand for such cars is therefore relatively high while the supply is limited, translating into a higher price.

Financing can also be different for new cars and used cars. Depending on whether a consumer is seeking to buy a new or used car, the terms he can obtain on a car loan can differ. It may therefore be beneficial to drivers to research their options for auto loans before coming to the dealership.