Does it make more sense to fly or drive? Should you buy or rent? Which came first, the chicken or the egg? Tastes great or less filling? There are some debates that seem to rage endlessly, and without a concretely correct answer. One discussion that seems to lack a clear-cut resolution is whether to buy a new or used vehicle. With used car prices at an all-time high, the debate becomes even more complicated.
Forbes reports that the average used car price for the 2nd quarter of 2015 was $18,800, “an eye-opening increase of $1,300 per vehicle on average from a year earlier.” In comparison, the average price of a new vehicle is in excess of $33,000. With the automotive industry enjoying a robust year for sales, it stands to reason that used car prices would decrease, however, that is not the case. Even older vehicles with poor fuel economy are getting more expensive, as used car prices are up across the spectrum of vehicle age. According to an Edmunds Used Vehicle Market Report, “Demand for older used vehicles is strong and we are seeing significant price increases for vehicles older than 10 years.” This means that even “clunkers” with poor gas mileage are getting more expensive.
According to CNN Money, approximately $15,000 is spent annually on housing, while an astonishing $7,592 is spent on transportation. To put that in perspective, the average spending for food is $5,620. So, how do consumers approach the decision on their second largest annual expense? An Edmunds survey found that 43% of car shoppers said they would only consider new cars, 24% would only consider used, and 30% were open to both. The survey found, however, that “actual data skews more toward used.”
Car and Driver took a look at the advantages to purchasing both. The advantages of a new car purchase include the ability to customize a vehicle, the superior warranty that accompanies a new car purchase, the fact that newer vehicles often contain the newest safety features and improved fuel economy, and more attractive financing options. However, Car and Driver does not just espouse the virtues of a new car. Among the benefits of a used car purchase are lower price tags, the lack of concern regarding deprecation, and sometimes lower insurance.
With the wide disparity of price between new and used cars, it is reasonable to assume that savings is a primary factor in the decision to purchase a new vehicle. However, an Edmunds report seems to show otherwise. According to the report, only about 20% of shoppers identify as extreme “price grinders,” meaning they will take as much time as they need to insure they get the best possible deal on a vehicle purchase. It is clear that while price is indeed a lead talking point in the debate, it may not be the only component.
Like many of the timeless debates, there is not a definitive winner when discussing purchasing a new or used vehicle. Ultimately, it is up to the consumer to identify the vehicle that fits their budget and best suits their needs. The current used car market is saturated and prices are at an all-time high. New vehicles that are able to bridge the gap in affordability and fuel-efficiency, while offering a good warranty, could tip the scales in the used versus new debate.