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Some cars are now cheaper brand-new than used: Buying these 5 models new will save you the most money

"Used car prices have risen, and prices have dramatically increased for certain in-demand models."

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It's a wild time in the auto market. A shortage of microchips has made it tough to get a fresh ride, so the average price of a used car jumped 32.7%, or $7,583, from June 2020 to June 2021, according to car-finding website iSeeCars.

For certain models, the price gap between pre-owned and never-owned has shrunk so much that it inverted: Some used vehicles now cost even more than the new versions.

Researchers at iSeeCars analyzed more than 470,000 cars listed for sale in June and found 16 models where prices for a new vehicle (model years 2020 and 2021) now exceed that of a lightly used one (model years 2019 and 2020, with between roughly 10,000 and 16,000 miles).

Here are the 5 pre-owned cars that have the biggest price differential between a new and used model.

1. Kia Telluride

Used car price: $47,730
New car price: $44,166
Price difference: $3,564 (+8.1%)

2. GMC Sierra 1500

Used car price: $57,671
New car price: $54,205
Price difference: $3,466 (+6.4%)                                         

3. Toyota Tacoma

Used car price: $39,857
New car price: $37,902
Price difference: $1,955 (+5.2%)

4. Mercedes-Benz G-Class

Used car price: $190,078                              
New car price: $182,631
Price difference: $7,447 (+4.1%)

5. Toyota RAV4 Hybrid

Used car price: $36,352        
New car price: $34,995
Price difference: $1,357 (+3.9%)

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The gap between new and used car prices is narrowing

The typical pre-owned car still costs less than a new one, but the gap is closing. In the first half of November 2020, the average used car cost more than 10% less than its new equivalent, iSeeCars reports. As of the first half of June, the difference is just 3%.

"Used car prices have risen, and prices have dramatically increased for certain in-demand models that may be harder to find on new car lots," iSeeCars executive analyst Karl Brauer wrote in the company's report. "Dealers may think used car buyers are willing to pay more for the instant gratification of a vehicle they can drive right off the lot rather than waiting for a new one."

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The five models listed above are in high demand, which helps explain why used versions fetch a premium. For example, the Kia Telluride, introduced in 2019, is such a hot ticket that some dealers have nicknamed it the "Sell-u-Ride." That means they can charge more than the suggested retail price for a new model — and given that the Telluride is still relatively new, that price inflation has trickled down to secondhand versions as well.

Other vehicles on the list are some of the most notable victims of the current supply-chain crunch for new cars. "Toyota has the leanest inventory among all automakers," Brauer writes in the report, which has driven up demand for used versions of hard-to-find models like the Tacoma and RAV4 Hybrid.

Inflation in other sectors plays a role, too: Brauer speculates that "used car shoppers may be willing to pay more for [the RAV4 Hybrid] as gas prices soar."

Shopping for a used car? When you may want to consider buying new

With such high prices for both new and used cars, you may be wondering which to choose.

A new car may appear like the safer bet for reliability, but pre-owned cars have gotten more dependable, and it isn't far-fetched to expect them to go repair-free for at least 100,000 miles, NerdWallet reports. There are other pros and cons to consider: Used cars often have lower insurance rates, while new cars have more robust financing options.

If your decision ultimately comes down to price, knowledge is your best weapon. Research prices for both new and used models at different dealers, and don't be afraid to look outside your local area. Platforms like AutotraderEdmunds, and Kelley Blue Book can make it easier to compare different vehicles.

Know "what the current market value is on the car you want, in order to tell what a good price is," says Ronald Montoya, senior consumer advice editor for Edmunds. "Don't necessarily rule out a new car if you started out looking used, and vice versa. Explore all your options."

Dealers may think used car buyers are willing to pay more for the instant gratification of a vehicle they can drive right off the lot rather than waiting for a new one.
Karl Brauer
iSeeCars executive analyst

Another money-saving tip: Be flexible about the small stuff. "The more specific you get with color choices and features, the harder it will be to find a car," Brian Moody, executive editor at Autotrader, previously told Grow. "Look for cars the dealer already has on the lot, and be flexible about the color, year, options, and interior."

If you have the ability to wait until the current car crunch starts to clear up, consider doing so. KBB's parent company, Cox Automotive, recently reported that Americans bought 12% fewer used cars this June than they did in 2020. That's allowing dealerships to rebuild their inventories, and as 2022 models start to roll in toward the end of the year, they might offer added incentives on the 2021 models they have left.

Plus, dealers tend to roll out the biggest discounts in the fall.

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