Used-to-New Retail Price Difference Narrows, but Still Fairly Close
In recent months, used-car prices have declined more rapidly than the slowdown in new-car prices, according to Kelley Blue Book. As such, there is more space now between used prices and new prices than there was earlier this year.
However, KBB’s Alec Gutierrez emphasized that the gap should stay narrow enough to “prompt consumer consideration for a new vehicle rather than a late-model used vehicle.”
Breaking down the slimming gap, Gutierrez explained that earlier this year, the fact that the price difference between 2011 model-year used units and comparable new vehicles was only 4 percentage points (when comparing average retail values as a percentage of MSRP) spurred shoppers to consider new instead of used.
However, that gap has grown much larger over the past few months, and now the retail listing value of a 2011 used unit is about 12 percentage points lower, on average, than the new fair purchase price of a comparable 2012 model, Gutierrez said.
“Since May, values of used vehicles have declined at a greater rate than new vehicles,” Gutierrez said. “Part of the widening gap can be attributed to typical used-car depreciation associated with the time of year, and increasing mileage of the 2011 model year.”
There are some outliers, though, where used prices are “still quite close” to the new-vehicle price. Gutierrez gave the examples of the 2011 models of the Toyota 4Runner, Jeep Wrangler and Subaru Impreza.
“These vehicles have been known to hold their value extraordinarily well due to their strong following and reputation for long-term reliability,” he said.
2012 Model-Year Used Units
While the price gap for 2011 model-year used units against new cars is slowing, KBB has spotted something different for used 2012 vehicles: the difference in transaction values is smaller between new vehicles and 2012 model-year used vehicles beginning to trickle into the wholesale market.
“The average used 2012 model with approximately 16,500 miles is about 8 percentage points more affordable than a brand-new 2012 vehicle available for sale at a dealership,” Gutierrez said. “This gap likely would be even wider if we were to compare these used cars with the all-new 2013 model-year vehicles that aren’t as heavily discounted as their 2012 counterparts.”
Future Trends?
Looking forward, Gutierrez offered a bit of analysis on how this price-gap trend may shake out in the future.
“As time goes on, expect the gap between new and used vehicles to continue to increase, as used-vehicle values descend from their current levels while supply improves at auction,” he added.