New ones are simply too expensive
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The price gap between new and used cars is higher than it has been in years. Not only is this driving car-buyers to used car lots in droves, but it is also forcing new car dealerships to bring down their prices in an effort to try to stay competitive. In addition, higher interest rates for car loans on new cars are not doing auto dealers any favors.

The recession  

In the years following the recession, new car prices have steadily risen, and, as such, more people than ever are willing to buy a used car (even those who would have never considered such a thing even a few years ago). The average price paid for a car hit an all-time high of $36,848 in December of 2017 and remains at near-record levels, according to Edmunds.com.

Additionally, as more leased cars return to the dealership, it is giving car-buyers more options than ever before when searching for a lightly used and well-maintained car. With nearly $40 million in sales last year, the used-car market is more than double the size of the new-car business.

Trouble for new car salesmen

All the commotion means that new-car salesmen will have to deepen their discounting just to prevent would-be customers from defecting to the side of the used car. According to The Wall Street Journal, “auto lenders have kept monthly payments low by extending loan-repayment terms to five and six years and introducing 0 percent financing on loans that made buying new a more attractive deal.”

But not all new cars salesmen can afford to keep up this kind of bargaining. The average monthly payment on a new car was $536 in August, up from $507 last year and $463 five years ago, according to Edmunds.com.

Auto retailers sold 10.4 million used cars in the second quarter of this year, according to Edmunds.com, the highest quarterly volume it has on record since the firm began tracking preowned sales in 2007.

The profit margin on a used-car sale was nearly 7 percent last year, more than double the return on a new-vehicle sale, according to the National Automobile Dealers Association, giving dealers more incentive to steer buyers to their pre-owned selection.

Takeaway

Times are changing, and new car lots aren’t bringing in quite as much money as they used to. Instead, it is all about the used cars these days as the incentives to buy a used car slowly become too good to ignore. In this new era, the stigma behind buying a used car is either outweighed by the sheer benefits, or gone completely.

 

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Posted 10.09.2018 - 09:00 am EST