A problem of asymmetric information - any buyer would have to consider that you know something about the car that the buyer doesn’t - and unlike a dealer, the buyer might have trouble finding you if there was a problem.
Like my wife’s Toyota Corolla. I did put effort into getting a good deal and I think I got lucky and found a tired salesman or one trying to meet a quota…but I didn’t get THAT good a deal.
Drive it for 5 years…put 45000 miles on it (we don’t drive a huge amount). Was in 2…TWO accidents but fixed. This is why my wife wanted it gone. 2 accidents but near misses by several more with people saying “Sorry I just didn’t see you”. It really seemed like an invisible car.
DIdn’t lie or misrepresent…totally upfront and a dealer…which are known for paying not as much as a private sale, bought it for $1800 less then we paid new. 5 years driving for $1800.
Used car prices are nuts for the risk and wear and tear involved and I think the advice everyone knows is true “Never buy new always buy used” is male bovine manure. I always buy new.
Edit - I know during these times the market is whacked…this happened about 10 years ago.
Several things to consider:
COVID-19 and supply issues have skewed the long-held approach that a vehicle’s value decreases the moment a new vehicle is driven off the dealer’s lot.
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My neighbor bought a new Subaru Outback in late 2020. The passenger seat wasn’t comfortable for his wife (back issues) so they sought to trade it for a new Nissan after about a year. They were surprised to find the dealer bought back the Subaru for more than they initially bought it new.
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I have a 2017 Mazda CX5, bought new. I am regularly hounded by the dealer to buy it back, as is, for more than I paid for it, now almost five years later. I have no plans to sell it because they have no newer replacement vehicle for me. (Here’s the topper. My daily home-work-home is only 12 miles. Since COVID I’ve been full-time teleworking. I only have 19k miles on the vehicle.)
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Note the ads for leasing a vehicle. The required down payment and first year’s costs are roughly the first year depreciation on a new vehicle.
I mean, not really. Yes, a gently used car purchased a few years ago is plausibly worth more than when it was purchased, but a new car also costs more, and if you buy the new car and it becomes a used car, it will immediately be worth less than it was new.
Supply issues have increased the value of all automobiles, but the new->used transition is still an immediate value drop.
This might hold for cars that are readily available both new and used, but is not the case for cars that have delayed availability new. For many high demand vehicles, a new one can be ordered, and will show up after many months, but a used one can be driven away immediately, so the used one costs more.
That has always been the case for some limited production exotic cars (and manufacturers often have “no flipping” rules), but now it is also happening with mainstream cars. If somebody takes delivery of a new F150 Lightning they ordered 2 years ago, they will likely be able to turn around and sell it for more than they paid.
You might be surprised at how narrow that drop in value has gotten, though. I purchased a new vehicle in April and putting it into KBB the Private Party value range extends almost $1,500 above the MSRP. Would I get that much, probably not, but judging by the classified listings I’m pretty sure I could get very close to what I paid.
Of course, that also depends on how much additional markup the dealer added. If there are dealers selling for MSRP, then that’s true. But many dealers are adding thousands more to the price of just about any vehicle. Not too long back there was a report of one dealer putting a roughly 100% markup on Lightnings.
I think the proper way to think about this is that the cost of the new model is $X and Y months, and the cost of the used one is $Z. The cost of the new car is still higher, it’s just higher in non-monetary ways.
One way to think about this is that traditionally cars were not supply-limited, so the only cost was monetary. Now that they are, and the manufacturers and retailers are sometimes undercharging for a variety of reasons, and there’s a scalper’s economy.
Like, are used concert tickets worth more than new ones? I think the answer is sort of obviously no, for the same reason that used cars often aren’t. There are lots of ancillary benefits that come with being the original purchaser. But used concert tickets are often priced higher than new ones, because the reality is that new ones are not available at any price unless you are lucky or willing to invest significant other resources (like time waiting in line) to get them.
Insufficient information to judge. If you call up the dealer, how many $ over MSRP would you have to pay for it to buy it today? Is it available at any price without waiting months?
I got an offer from our local dealership to buy my 8-year-old car for just a few thousand less than we paid for it, but what good would that do me? I’d just have to buy another car at high prices.
You’re in the market for a new car who are you going to trust, a dealership or Joe Schmoe with a used car in his garage? Is the garage car a lemon? How do you know? …Along with all the other reasons mentioned above. I think you are confusing absolute value with market or perceived value.
Retail prices include a profit for the seller. If you buy a car today for $5000 that cost the dealer $4000 why would I pay you $5000 for it? What did you do to add a $1000 profit on that sale?
Used car prices are based on the market (obviously with some variation based on individual condition of the vehicle). So the reason you pay me $5000 for a car that I bought new for $5000, is because the only way you’re going to get the car is to pay somebody $5000 for it. Maybe you can wait in line for a new one, or maybe the new ones sell for $5500 now.
The way to flip it around is, why should I sell my car to you for less than $5000, if that’s what I can sell it to somebody else for?
Because you can’t, no one will pay that much for it, that’s why this thread exists. You’re not a dealership, you offer no extra value to your customer. Cars don’t jump $500 in value overnight either. I don’t have to pay you $5000 for a car like that, I’ll buy one for $4000 from someone else selling a used one, or from you after you can’t find anyone to pay $5000 for your used car.
Yes, that’s exactly how a market works. If I’m asking $5000, but there are other people selling equivalent cars for $4000, then I’m not going to get what I want. However, if I picked $5000 because that is what other ones are being listed for, and what KBB and such say is a good private sale price, then you’re unlikely to find an equivalent car for $4000 (and if you do, take it, because it’s a good deal (or they’re hiding something)).
It has nothing to do with added value to the customer, purely what other people are willing to pay for the car. If there are 5 cars for sale, but 6 people who want cars, the price will go up.
Why would KBB list a good used car private sale price that is the same price of a new car? Why would anyone buy a used car from you instead of getting a new one for the same price from the dealer? While that’s enough of risk for any resale like that it is incredibly risky for something like a car where the high price disincentivizes you to make good if any problem occurs. People pay more at the dealership in the first place because the dealership provides a valuable service.
If I wanted to pay less than I can get from a dealer or equivalent service I might offer you $4200 for that car. That’s a fair offer that you better take me up on because I’m in a hurry and I’m buying some car today. You can wait for the next guy but he’s probably not going to offer you more than $4000. I have cash with me, we can do this deal right now or you take your chances that anybody will offer even $4000 tomorrow.
I really have no idea, a used car should lose some of it’s value. I just went to KBB and asked for a new price for a new 2022 Kia Sportage SX. It comes back and says a new “fair market range” is $35,152–36,245, and a used private party sale range for the same car with 10,000 miles is $34,732–$37,350. The “fair market price” of the used one is higher than new.
MSRP is $36,465, and Carmax has one (in the whole country) with 18,000 miles for $34,998. Autotrader has more used ones listed, with some in the low $30s, but most are $35+. In this case I can’t imagine why somebody would buy one used, but that’s what they’re asking for, and “dealers near me have models to choose from.”
All I’m trying to say is that it has nothing to do with value, but with markets, and markets don’t have to make sense.
It doesn’t matter what you offer, if your offer is out of line with the market price nobody will accept it. I’ve experienced that in real estate when I rent out my condo. I always have people come and ask if I’ll take 5% less than whatever I’m asking if they sign a lease right now. No, I’ve already got three other people willing to sign a lease right now at my asking price, and I’m just collecting applications to pick the best risk. If I haven’t rented it after two weeks, I’m going to be much more interested in that 5% discount.
Back to the OP, it only seems logical that cars lose value after they leave the dealer’s lot, but in the real world, the actual value might not drop very much, if at all, and in some cases even go up. Two years from now it might be different. If you’re shopping for a late model used car, also investigate new. If you’re shopping for a new car, maybe check some used prices just to see if there is massive depreciation in the first year.
When I was a fleet manager back in the 80s, I talked to dealerships regularly. We kept our cars for three years and sold them at auction. Keeping track of “The Cost of Ownership” was a routine part of our accounting so that we could make informed decisions about makes and models.
As a fleet, and as part of an organisation with a much bigger fleet, we were routinely getting a 20% discount on the list price of most cars. At a time when inflation was running at 4% or more, the difference between purchase and sale price was fairly small. I was told that the major car-hire companies were able to get a 30% discount and they sold their cars at six months old (Immaculate and low mileage) for more than they paid.
Few people in my experience are truly aware of how much their car costs to own. Depreciation is the second highest cost after fuel, but most of us only think in terms of fuel, maintenance and insurance.
We’ve entered a semantic traffic circle now. The market sets the price in the end. Small variations in prices are a characteristic of retail. The market always makes sense on average, or else bad things happen. There’s enough variety in pricing reflecting the complexity of establishing value, and that creates opportunities.
Okay, try this. You go into the dealer as I am picking up my new car. You see me fork over $5000 for it.
You ask the dealer to buy that same car for $5000, but he says that it’s an 18 month waiting list, and he is charging $6000 for the car now, due to demand.
You need a car, and can’t wait 18 months, how much would you be willing to pay for my car?
That is not normal market behavior though. Of course you can advantage of something like that, any sudden shortage in the market can open that opportunity. I don’t think that 99.999% of car sales would ever have that circumstance arise.
Most of the time I’d agree with you, but we are not in normal market behavior. Right now that circumstance is the reality, which is why used cars are selling for more than they paid for them.
I’m not sure why you have such certainty that the very circumstance that is happening would never arise.
And while it’s not normal behavior for the car market, when there are usually cars waiting to be bought, rather than buyers waiting for cars, there are a number of markets where that is the norm. As someone upthread mentioned, scalping tickets. Your favorite entertainment group is coming to town, and you want to see them. When you check the website for the venue, it says that tickets cost $20, but they are sold out. Someone else has a ticket and you ask them to sell it to you. Would you expect them to sell it for $20 or less, or would you expect them to mark up the price?
You asked what service the used car seller has over the dealer, and that’s having possession of a car you want to buy. The dealer doesn’t have it, the private party does, that’s the value added that tacks on the premium.