New-car deals can ri­val cost of pick­ing one out at used lot

as av­er­age price of pre-owned ve­hi­cles rises, cheap fi­nanc­ing, cash back nar­row dif­fer­ences

Austin American-Statesman - - BUSINESS - By Gre­gory Karp

Used-car prices in the United States are soar­ing, cre­at­ing a wacky sit­u­a­tion for many mod­els in which buy­ing new costs about the same — or less — than buy­ing used.

Credit the pro­longed re­ces­sion with prompt­ing more Amer­i­cans to buy used, send­ing the av­er­age price of a 3-year-old car up 11.1 per­cent from last year and triple the usual an­nual in­crease, ac­cord­ing to Ed­, an auto re­search site.

Com­bine that with the fact that au­tomak­ers con­tinue to of­fer cash back and fi­nanc­ing as low as zero per­cent, and shop­ping on the show­room floor comes out about the same or less than vis­it­ing a used-car lot, ac­cord­ing to a new study by Ed­munds.

“The les­son is def­i­nitely do re­search,” said Jes­sica Cald­well, se­nior an­a­lyst at Ed­munds. com. “Just be­cause you want to buy a car and don’t want to pay that much, don’t nec­es­sar­ily as­sume that used is cheaper. You have to re­ally do the math.”

Ed­munds’ study iden­ti­fied 41 ve­hi­cle mod­els that were cheaper to buy new com­pared with a year-old ve­hi­cle, if both were fi­nanced for five years. It found 73 more mod­els that cost about the same new or used.

Ex­am­ples in­clude a pre­mium ver­sion of the Audi S4, which was $3,780 cheaper new over the term of the loan; Cadil­lac CTS, which was $3,180 cheaper; and Volk­swa­gen Beetle, $3,000 cheaper.

Con­tin­ued from pre­vi­ous page

Ed­munds also iden­ti­fied 93 mod­els that were cheaper or about the same new as buy­ing a year-old “cer­ti­fied pre-owned” ver­sion, which comes with a man­u­fac­turer war­ranty.

The small gap be­tween newand used-car prices — steadily nar­row­ing for about 18 months — is likely to con­tinue for “at least an­other year,” said Paul Tay­lor, chief econ­o­mist of the Na­tional Au­to­mo­bile Deal­ers As­so­ci­a­tion. That’s par­tic­u­larly true of truck-based SUVs, which have surged in the used­car mar­ket, he said.

Though other au­to­mo­bile price ex­perts are see­ing the price dif­fer­ence shrink be­tween new and used ve­hi­cles, they don’t see it as per­va­sive as the Ed­munds study sug­gests.

For ex­am­ple, Kel­ley Blue Book has noted a rise in used­car prices but not to the point where they’re sur­pass­ing new­car prices, said Juan Flores, di­rec­tor of ve­hi­cle val­u­a­tion for Kel­ley.

“I’m sure there are op­por­tu­ni­ties out there or in­stances (where it’s true), but I’m com­fort­able say­ing it’s prob­a­bly go­ing to be the ex­cep­tion rather than the norm,” he said.

Re­li­able, high-de­mand ve­hi­cles such as the Toy­ota Ta­coma, Chevro­let Ca­maro SS, Mini Cooper and Dodge Chal­lenger are among those whose new and late-model prices might be close, he said.

A ve­hi­cle with a lower price new than used would be an anom­aly, Tay­lor said. The real ques­tion for con­sumers is whether there’s enough price dif­fer­ence to jus­tify buy­ing used.

“Typ­i­cally, a used car would be less, but maybe it’s not enough less,” he said.

This isn’t the first time new-and used-car prices have con­verged. Dur­ing the July 4 week­end a year ago, Con­sumer Re­ports found deals on Honda Ac­cords and Odysseys that made new mod­els less ex­pen­sive than year-old used ones.

It’s im­por­tant to note that the Ed­munds re­port as­sumed auto fi­nanc­ing for five years, which is typ­i­cal, and no down pay­ment. Cus­tomers who pay cash will al­most al­ways find used cars less ex­pen­sive, and those who fi­nance used cars will gen­er­ally find the in­ter­est rates to be higher.

The study also com­pares prices of new cars with only year-old coun­ter­parts. Buy­ing a 2-or 3-year-old ve­hi­cle is far more likely to be cheaper than buy­ing new.

And the study con­sid­ered monthly pay­ments only and did not in­clude typ­i­cal re­pair and main­te­nance costs, which are gen­er­ally lower on new ve­hi­cles.

It’s also im­por­tant to note that prices and in­cen­tives vary by re­gion and even among nearby deal­er­ships.

geTTy im­ages

It can pay to do the math when com­par­ing newand used-car val­ues. It’s not just the sticker price but in­ter­est rates and dealer in­cen­tives that fig­ure into deals.

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