The Strange New Used Car Math
Used car prices are at their highest levels in 16 years. People are keeping their cars longer, so used car supplies are tight. In order to keep their used car lots filled, dealers are paying more for the cars they buy. So, used car sellers take note: sell your car now and you could make more money than at any other time in the car’s life.
However, it’s not that simple. If you sell your car, you’re probably going to need to buy another one. Though you’re likely to net more selling your car, you’ll also pay more for one to replace it. All the extra money you got on your trade-in could be wiped out by the higher price of the new car.
Just how much extra you could get selling your car (and how much extra you’ll pay for another one) depends on the type of car you’re buying and selling. Constricted supplies of new Japanese cars with good gas mileage means the prices of similar used cars have gone up, just like the price of those new-car models. Though you’ll probably get a good price trading in your used, fuel-efficient small car, you’ll pay more for a new one, so you may end up just breaking even on the deal. On the other hand, if you’re trading in something small for something bigger, and fuel economy isn’t a concern, you’ll probably end up with a little more money in your pocket. Finally, if you’re trading in a gas-guzzler for something small with good mileage, good luck. You probably won’t get a very good deal.
Making the used car math even more confusing is that in some cases, it may actually be cheaper to buy a new car – used car prices are that high. Kelley Blue Book says the retail value of a 2009 Honda Civic Sedan LX with 35,000 miles on it is $18,535. The MSRP of a 2012 Honda Civic LX Sedan is $18,655, just $120 more. Also consider this: if you finance the 2009 Civic at 4.8 percent for four years and put $2,599 down, you’ll have a monthly payment of $365. Right now, Honda is offering leases on 2011 Civic LX models that require the same amount down but only cost $189 per month for 36 months. Before jumping on a used car and assuming it’s the best deal, run the numbers. You could end up paying less by buying new.