Used vs New Cars in 2019

August 3rd, 2019 by

used vs new cars in 2019

If you need to replace a car in 2019, should you buy used or new? The used vs new debate is one that has been around for decades in terms of the basics and we already posted an extensive blog post on new versus used cars. New cars take a major hit on depreciation for their first several years. Used cars run the risk of saddling you with higher maintenance and repair costs. But what about the big picture in 2019? What’s happening in the larger auto market that might influence whether you choose used or new? Read on to find out!

Used Cars vs New Cars: Reviewing the Basics

used vs new cars basics

One of the biggest things you should consider when debating buying used vs new for your next vehicle is the depreciation angle. When you drive a brand-new vehicle off a dealer’s lot, it immediately loses a full 10% of its value, meaning it’s now already worth less than what you owe on it if you financed your purchase.

To add insult to injury, the new car will then lose at least another 10% of its value over the course of its next 12 months. That’s a grand total of 20% depreciation just in year one! And the new car will continue to lose anywhere from 15-25% of its value for the next several years. Kind of depressing, right? You could be “underwater” or “upside-down” on your car loan for the first four or five years!

Buying a used car has its own drawbacks, of course. You risk buying something that has problems that will cost you money to address. But there are two things you can do about that. First, take the car to a trusted mechanic before you buy it and have it thoroughly inspected so you’ll know exactly what you’re getting into. The other thing you can do is focus your used car shopping on newer models with fewer miles that are in great shape. When you do this you greatly reduce your chances of buying a car with problems (and still take it to your go-to mechanic for a thorough inspection just to be sure). If you follow this advice, you end up getting a lot more bang for your buck buying used. And you’ll achieve positive equity in the vehicle much faster as well. We think that’s a win-win!

What’s Going on With New Car Prices?

new car prices

CNBC recently ran a story with the headline, “Prepare for sticker shock if you haven’t shopped for a new car lately.” This is because people have been holding onto their new cars longer, on average about six years. If the last time you shopped for a new car was 2013, the average price people were paying back then was $31,434. The average price paid in 2019 as of June was an eye-popping $36,902! What’s driving these price increases?

First of all, all the fancy new technologies that make driving both safer and more pleasurable are driving up costs (and make for more expensive repairs, too). To keep payments reasonable, people are stretching out their car loans to an average of 70 months (nearly 6 years), which also drives up the total cost of a new car (and are also rolling more from their previous loan into the new loan). Part of it also has to do with people buying pricier vehicles to begin with, such as SUVs and trucks.

The cost of new car loans has also been going up. Interest rates on new car loans are at their highest in a decade. Even for those with great credit (a score of 700+), the interest rate on a loan for a new is averaging 4%. Rates for those with less-than-stellar credit will be substantially higher, ranging anywhere from 6-12% (source).

Add on top of all this the extreme uncertainty around what President Trump is doing or threatening to do with tariffs and the picture could look a lot worse. If he increases tariffs on imported vehicles to 25%, new car prices could go up by an average of $5,000 (source). The real kicker is it wouldn’t really matter if the car were made in the US or in another country. Why? Because each auto maker as a whole will spread the cost of those tariffs out across models to avoid having one or a few take a big hit.

The various factors outlined above are all coming together to drive up car prices, which is why industry analysts are actually predicting a drop in new car sales for 2019 below 17 million as compared to 2018’s 17.3 million.

The Outlook on the Used Car Market

used car market

Most industry analysts are talking about a relatively flat trend in terms of used car sales, probably right around 40 million vehicles trading hands (and yes, the used car market is way bigger than the new car market!). The strong demand for used cars could drive the price up, but a good influx of vehicles entering the used market (such as coming off leases), should keep prices down. Then again, if there is a significant drop in new car sales because people are going to opt for used instead of new, the rise in demand for used cars could put upward pressure on prices. Keep in mind that predictions are only predictions, and are always an imprecise science.

All kinds of things affect the used vehicle market, including the weather! Thanks to hurricanes Harvey and Irma, the two powerful category 4 hurricanes that struck the US within a two-week period, more than 1 million cars were destroyed or severely damaged (source). Most of those had to be replaced, which created a huge spike in the demand for used cars, driving up prices in the months following the storms. When the replacement demand was met, prices did come back down, but not to same level they were at before the storms. In other words, regardless of where prices end up as dictated by normal market forces, the wild card of severe weather can throw it all out of whack. And climate change scientists are pretty clear that as global warming continues, severe weather incidents will be both worse and more frequent. In the used vs new debate, if you decide to lean towards used, it might be wise to make your purchase before hurricane season peaks!

Get the Most Bang for Your Buck at Auto City

used cars at auto city

As a used car dealership serving the greater San Diego area from our location in El Cajon, Auto City offers the best advantages when buying used. A major ingredient in our recipe for success is our superior selection. We focus on acquiring more recent makes and models in great shape featuring lower miles. This gives you the double advantage of not only avoiding the big depreciation hit you take when buying new, but also gives you the peace of mind that you’re buying a high-quality car that will serve you well for years to come. Check out our current inventory and see for yourself!

But there are more reasons to shop for your next used vehicle at Auto City. Our perfect pricing initiative means you never have to haggle over price. We’ve done the legwork to figure out fair, competitive prices for each of our vehicles, and the prices are firm. No negotiating required! Most people love this. And what goes hand-in-hand with our perfect pricing is letting you take the lead throughout the whole car shopping process. No high-pressure sales tactics. No tricks to get you to buy something more expensive than you were looking for. No rushing you to make a sale. You can move as quickly or as slowly as you want.

In our way of thinking, the whole endgame strategy is nothing but making sure each customer is completely satisfied with their purchase. We want you to find the car that’s right for you. One that will meet your needs and that you can afford. When you’re satisfied, our reputation benefits, which leads to more customers. Our commitment to customer satisfaction is so strong that we even offer a 3-day money-back guarantee. If you have second thoughts about your purchase, just bring it back within three days and we will give you a full refund – no questions asked! But if you do this, we would of course love to know why so we can learn from it.

Finally, we also want you to know how we rock at car loans! We’ve got a fantastic network of lenders. We send your application out to all of them because when they’re competing for your business, you’re the one who ends up winning with better rates and terms. And we’ve got lenders who can work with any credit situation from awesome to seriously challenged, including bankruptcies. You can even get started online with our simple, secure application form.

If your take on the used vs new car buying debate in 2019 has you leaning towards buying a used car and you’re in the San Diego area, you owe it to yourself to see how we do things differently at Auto City!